Conference nyoss1::market_investing

    
    
    Not to get too far into politics, but the point might be to get the
    president to commit to a balanced budget, and then reduce the
    amount of money that he has.  If you just reduce the funds,
    the govt. can spend the same and just create a bigger deficit.
    If it's committed to balance, Govt would shrink hugely (A 
    largely republican tenet.)
    
    
    Bart

I've read in several magazine articles that these rates assume increased
growth and decreased spending.  One article estimated that at current growth
and current spending that the rate would need to be closer to 22-24%.

The problem is, as usual, that all of the information that is given has 
an agenda driving it.  Unbiased information is rare.

Al

    I don't think you have enough information to make your decision.
    
    	Forbes: 
          says a family of 4 would have a $36000 exemption.
             (not just $13,000 per child)
          does not tax investment income or capital gains
    
    	Gramm:
    	  would tax your investment income and gains.
    
    	Kemp commission:
    	  well, we sorta like a flat rate that isn't flat and preserves
          everything every voter wants except those at the IRS, which we
          would abolish...
    
    	Lamar (Who?):
    	  VAT - national sales tax collected by the states.
    
    I like the flat tax idea. It needs some work. It may be possible but 
    it won't go easy. Have you seen the ads yet by the life insurance lobby
    telling what a bad idea not taxing capital gains would be? (can you
    say: annuity?)
    	

	The Forbes plan actually is $13,000 per individual (2 parents)
	and $5000 per child. That's where the $36K comes from. 

	My numbers also assume that capital gains and interest income ARE 
	being taxed in both the Forbes and Gramm cases.

	The skeptic in me thinks this is a bit too generous.

	 

    Forbes plan does NOT tax capital gains and interest income

That makes my numbers even better.

>>I used my last years tax return (adjusted gross income) and applied both of 

    Don't you have to start with your gross income?  I thought some of
    the proposals would remove some or all of the deductions that lower
    your gross to the adjusted gross.

    -dave

Taxes are not the problem.

    SPENDING IS THE PROBLEM.

Get spending under control and our tax system will look a whole lot better.
Fail to control spending and no tax system, flat or otherwise, will be any
better than what we have.

The flat tax concept is attractive only because it appears to offer a tax
cut for everyone -- an obvious impossiblility!  Polliticians love it because
because it distracts from their failure to address the real problems with
spending.

re: .7 

Adjusted "Gross" Income is your total income before any 
deductions are applied. It's the number that appears on the
bottom line of the front page of Form 1040. 

    What about hidden (social - criminal(?)) costs?

    Just something to think about.

    Tom

  After watching the Jim Lereher marathon group question/answer program on 
PBS this past weekend, the flat tax (from the horses' mouths) look like this:

  Forbes - $13000 deduction for adults, $5000 for children.  Gross income only 
includes earned income from wages.  No other deductions and no tax on dividends,
interest, capital gains.  17% tax for all.  Forbes also supports a change in 
the social security tax; some of it would continue to cover the current 
recipients but a percentage would go to a retirement fund for the individual
paying the tax.

  Gramm - keeps the home mortgage and charitable contributions deductions.  
Either he didn't specify the percentage or I blinked and missed it.  I also 
don't remember hearing a specific number for the personal and dependent 
deductions.

  Forbes makes it clear that he expects tax revenues to increase as the economy 
expands in his atmosphere of "hope, optimism and growth."  Forbes is a success-
ful business man who probably has a better global view than I do.  I haven't 
a clue whether this plan would be good or bad for the economy but I do agree 
strongly that the IRS is a drain on the economy and should be abolished.  His 
plan is at least simple enough to go on a postcard and is probably fair.

  Gramm makes it clear that spending has to shrink drastically.  He plans to 
chop whole departments and probably should.  Even from my lowly perspective, 
the amount of money going into the Washington sinkhole is bad for growth.  I 
suspect that keeping his deductions (mortgage and charity) would just leave 
the door open for further deductions supported by the most powerful lobbyists.

  Mind you, I don't like giving up my mortgage deduction; I live in California 
and bought a house five years ago!!  However, the large personal deductions in 
the Forbes plan would make up for a large chunk of it and I suspect his plan 
would help my kids.  My daughter is still in college so her income is low 
enough that she'd pay no tax.  My son is just starting out so his income is 
not very high; this plan would probably make it easier for him to save for 
a house.

  A columnist in the local paper discussed all the cons of the flat tax.  As 
a middle income wage earner he thinks that the rich should pay more.  I guess 
what bothers me about this is that a lower income person probably feels the 
same way about the mortgage deduction for the middle class.  The middle class
looks rich from a certain point of view (not mine, of course).

  Aside from the politics, it doesn't take a rocket scientist to figure out 
that the IRS is a disaster and that we waste too much time on filing both 
corporate and individual tax forms.  Most people also recognize that the 
entitlement programs are going to be in big trouble as the baby boom bubble 
hits social security and medicare.  Higher taxes cripple growth because we 
have less money to invest.  Ditto, large debt.  I have no idea what plan would 
actually work, but we're at the point where we have to do something drastic.
Sure wish I had a crystal ball or a PhD in Economics :-)

			SQ

I also whatched the marathon on PBS. It was quite interesting.

It seems to me that since there are only about 6% of the households in the
U.S. with incomes above $100K (definition of the rich) it is unlikely that
they will make up the significant tax revenue shortfall, not that they 
were expected to. 54% of the households in the U.S. are classified as 
middle income ($25 - $100k income). Guess who pays the lions share of 
personal income taxes.

Forbes' idea that putting more money into the hands of the taxpayers will
cause all this growth that will boost the economy and thus create more
tax revenue seems to be too much wishful thinking. Regan tried this under 
the name supply side economics and managed to tripple the national debt.

I would love to see some tax relief but first we need to get the debt down 
and start working under a balanced budget. 

Pat 

    Some of the CEOs take nominal salary [e.g. Cabletron founders have
    salary of $52K each]. Steve Forbes probably leaves on interest income,
    dividend income and the captal gains.  
    
    No wonder, he loves his flat tax proposal.  He also does not own any
    stock in H&R Block :-)  If you abolish IRS, you will be killing an
    entire service industry devoted to tax consulting, tax management and
    tax preparation.
    
    Most middle class are wage earners who would end up bearing the brunt of
    the tax bite under his insane proposal.
    
    Realistically,  it has as much chance of flying as does
    decriminalization of soft drugs in US; there is too much vested
    interest for the status quo even if the proposal had some real merit.
    
    - Vikas

So you're taxed on more than just your gross earnings. Boston Globe had an
article on several candidates' tax proposals last week. Their conclusion was
that many of us would see our txes going up rather than down.

						Trace

	The reason why supply-side failed under Raygun is he also increased
spending dramatically at the same time (military).  if he hadn't done this,
perhaps supply-side would hjave worked.  but, no one will ever know.

	Forbes's plan is supply-side all the way.  decrease taxes on
the rich, and since they are the ones who do the most investing, they will
have more to invest, which leads to growth in the econ.  flat tax appeals to the
general populous because it sounds real simple.  people are dreaming of
filling out a very simple 1-page form for Fed taxes, ala 1040EZ.  personally,
i don't see how they can do it.  i worry that a flat tax will cause a serious
deficit (spending) and the gov't will be forced to up the flat rate to levels
close to where taxes are today, completely screwing the middle class.

	becareful how you vote.

    Forbe's has a ton to gain from this.  His family fortune will be
    distributed in the next five years or so.  His plan calls for no
    inheritance tax.  What would the estate tax on 1.5 billion be? 

    Let's keep the flamage and opinions out of this, please. There are
    other places to debate politics. The question here is economics.
    
.13>    If you abolish IRS, you will be killing an
.13>    entire service industry devoted to tax consulting, tax management and
.13>    tax preparation.
    
    ... meaning those folks will have to find something PRODUCTIVE to do,
    instead of duking it out with the IRS. It's like two kids on the block
    spending all their time fighting. If instead you put them to work doing
    something useful, both they and society gain.
    
.16>   Forbe's has a ton to gain from this.  His family fortune will be
.16>   distributed in the next five years or so.  His plan calls for no
.16>   inheritance tax.  What would the estate tax on 1.5 billion be? 
    
    50%, though I heard he was worth only $400 million. Independent of 
    the total, note that this is taxing money a second (third, fourth) time.
    
    
    
    Some 1993 U.S. figures, for educational purposes only:
    
    Top  5% of households made 20% of the total national household income.
    Top 20% of households made 48% of the total (including the 20% above)
    Mid 60% of households made 48% of the total
    Low 20% of households made the remaining 4%
    
    Anybody have the corresponding fractions for taxes paid?
    
      John

    
    Re .12 - Pat:
    
    >Guess who pays the lions share of personal income taxes.

    Could you tell me?
    
    >Regan tried this under name supply side economics and managed to 
    >tripple the national debt.

    Income tax revenue increased during the 80s. The reason for the
    increase in the deficit was because spending increased faster
    than revenues. There have been three times in U.S. history that
    tax rates have been cut significantly. Each time govenment revenue
    increased afterwards.
    
    Pat, I share your concern about the deficit, and I am not sold
    on Forbes' plan. However saying that cutting tax rates will increase
    the deficit would be to against history.
    
    						Ed
    
    

    	My daughter asked the amusing question the other day - "Isn't
    a flat tax more fair?".  I didn't know where to begin to phrase a
    reply.  However, I did indicate that it depended on what one meant
    by "fair".
    
    	If we assume that we want to take in the same number of dollars
    with a "flat tax" as we do with today's current system, then we can
    reasonably ask which group will pay more and which less, for
    certainly there will be some of each.  It then becomes a question of
    whether we believe that this is a more "fair" system (for surely that
    must be the goal?!).
    
    	I would point out that already the "flat tax" is amended by
    providing large personal exemptions (larger than our current system).
    What other "fairness" exemptions are needed?  What about medical
    expenses, state taxes, charitable contributions, capital gains/losses,
    just to name a few big ticket items?  Does eliminating these items
    make the system more "fair"?
    
    	What is painfully obvious to me is that there is the appearance
    of raising the floor of who pays (at all), and dropping the rate for
    those earning large amounts.  Given that, it sure looks like those in
    the middle must be in for a nasty increase.
    
    	It has become fashionable to take from the rich (via taxes), and
    our tax system has grown up around this notion, with much higher rates
    applied to those with large incomes.  As soon as people realize that
    the taxes on the rich would dramatically decline, so will the interest
    in any such flat tax proposal.  I agree that the whole idea is more of
    a diversion than a serious proposal.  It simply does not meet the man
    on the street's definition of "fair".
                                   
    Cheers!
    Dave Eklund
    	

I believe that the lions share of income taxes are paid by the middle 
class. Though I'd like to see the supporting data that John asked for
in .17

re: .19
>>    It simply does not meet the man
>>    on the street's definition of "fair".

There was a WSJ article about a week or two ago on the OpEd page.
A survey was conducted by Reader's Digest, asking the question,
"what do you think should be the maximum income tax paid by people
earning over $200,000/yr, including federal, state, and local taxes?"
Respondants from all age groups, income levels, races, and political
leanings overwhelmingly said "25% should be the maximum".

Back to the economic issue,...
Evaluating the flat tax proposal on a personal finance level is one
factor to consider.  The question I pose is, would the change in tax
code provide a healthier (more efficient) and more robust economy?
encourage innovation? reward risk? reduce (federal) power abuse?

I think that the flat tax concept has quite a bit of merit when compared
to the current system which stifles the incentives to innovate.  Under
the current system, the successful are penalized for taking further
risks -- it is the successful who should be given the incentive to
innovate further.

-Austin

    
    RE .20 - Pat
    
>I believe that the lions share of income taxes are paid by the middle 
>class. 

    You would be wrong. From Today's Globe:
    
    "The richest fifth of taxpayers already pay more than half of all
     federal taxes"
    
    As this includes SS tax, and the richest fifth certainly pays far
    less than half the SS tax, then it's certainly the case that
    the richest fifth pay well over half of the income taxes.
    
    I also read recently something like those families making
    more than 85K pay 75% of the income tax. However I'm not
    exactly sure of the figures.
    
    					Ed
    
    

.17>   Top 20% of households made 48% of the total [...]
    
.22>  "The richest fifth of taxpayers already pay more than half of all
.22>  federal taxes"
    
    So we have -SOME- data that indicates the top fifth of taxpayers make
    about half the income and pay about half the taxes. 
    
    I'd say that's about fair. Of course, "fair" is a subjective and
    political term, so we don't want to go too far down that rathole.
    
    The non-political question is: how would things change under a flat tax?
    Would this top 20% pay more, less, A LOT more or A LOT less?
    
      John

>    The non-political question is: how would things change under a flat tax?
>    Would this top 20% pay more, less, A LOT more or A LOT less?

Well, if they're paying the 28% or whatever now and this is replaced
by 17% I dare say they'll be paying a lot less.  And if those between
36000 and 80,000 pay just 17% they'll be paying less, too.  And, if
you can imagine, those making $36,000 or less paying *no* tax, they'll
be paying less as well.

See?  Everybody wins!

Tom

PS: How'd ya like to buy a bridge?  (cheap!)

    I'm  a "Read only noter".... But I got a simple question:
    
    If everybody is going to pay less taxes how are we going to pay for
     New Roads, provide the poor with educational opportunities as well as
    making sure we have a safe and healthy environment.
    
    I was born and grew up in a third world country. It amazes me how many 
    people think that by getting a tax cut somehow all of us will become
    rich.  You havn't seen much on unkept highways, bad health care, rampant
    polution or an uneducated population. Believe me, it isn't a pretty sight.
    
    I say we don't really need a tax cut, we need a balance budget.  We
    also need much tighter constraints on gorvernment spending, we need to 
    end "Corporate Welfare" and Welfare without having to work for it. 
    
    Just my 2 cents
    
    J.Q.

    
>    If everybody is going to pay less taxes how are we going to pay for
>     New Roads, provide the poor with educational opportunities as well as
>    making sure we have a safe and healthy environment.

All of these are part of the big government we are supposed to be getting 
rid of.

You want ME to pay for YOUR road!!!!

No way, buddy.  Buy your own road.


    

  Of course "everybody" doesn't win in a flat tax if all we look at is the 
tax piece of it.  Listening to calm, intelligent, rational discussions of 
this issue (and I include this thread -- I appreciate the lack of flaming in 
here) I realize that it will be absolutely impossible to truly reform the IRS.
No one wants to give up the deduction or income credit that helps them.  I 
also strongly believe that the reform must take place for the economy to grow.

My father-in-law hated the IRS; he always referred to them as the Gestapo
(since he escaped from the Nazis, he probably has a good point of referrence).
I fear their power and the havoc they can wreak on the average citizen.  I also 
suspect that our horrendous tax code is depressing our economy but I don't 
have enough data to support that.

Forbes is getting a lot of attention at at time when we're all struggling with 
our W2s and 1040s.  We're also seeing more automatic audits from the IRS, 
those surprise letters that say you made a mistake and now owe them x dollars 
more.  I think I read that they are wrong 40% of the time, but most people pay 
it because they don't think they can win.  We did, but we also had to pay our 
accountant for his time to write our defense.  The IRS had me confused with 
someone else so my accountant wasn't having to defend his work, just point out 
the error of their ways.  If the IRS had just checked my social security 
number I wouldn't have had to go through any of this.

Someone in an earlier note mentioned that all the tax preparers would have to 
find productive work if the IRS disappeared.  That's as it should be.  The 
good tax preparers are already doing other work; accounting, estate planning, 
real estate, etc and absolutely hate all the added work and headaches that 
come in the first few months of every year.  The tax preparers who only live 
off our misery aren't contributing to the bottom line.

The irrational discussions that I've heard elsewhere have focused on a flat 
tax leading to lower property values, no contributions to charity, Forbes and
Gates retiring and never paying another dime in taxes and on and on.  While 
tax deductions do drive certain behaviors, most of us will still strive to 
buy houses since we need a place to live during retirement.  We also like the 
freedom that comes with it to paint, hang pictures, etc.  Property values 
will probably stay stable, although I'm not sure they shouldn't come down a 
little in California.  Most of us will still contribute to charity although 
we might be more careful in choosing deserving charities.  I just don't buy 
the "sky is falling" arguments.

As for the rich paying or not paying their fair share, I don't know when we 
actually became a country that thought it was "entitled" to someone else's 
income but I do know it is very detrimental to the economy.  When you look at
a Gates or a Forbes and make statements about what's fair or not fair, don't 
forget that they provide the jobs for the people who would have to pay these 
so-called unfair taxes.  I also look at what's going on in Europe with their 
economies more and more dependent on the government.  It isn't pretty.  I also 
note that the very rich take up residence in places like Monaco to avoid the 
high tax rates at home, which is one reason why raising taxes rarely produces 
the revenue expected.

As a country we need to get our spending under control so we have more capital 
to invest in new companies that will provide more jobs.  We also need to cut 
our spending so that tax reductions don't inflate the deficit.  I have a hard 
time following the logic that says tax reductions will increase the deficit -- 
I guess I don't understand why spending is assumed to continue to grow.  While 
I freely admit I don't have the economic background to be sure of the right 
way to go, I do think we need to make some drastic moves to get our country 
moving upward again.

			SQ

RE .26
    
>>    If everybody is going to pay less taxes how are we going to pay for
>>     New Roads, provide the poor with educational opportunities as well as
>>    making sure we have a safe and healthy environment.
>
>All of these are part of the big government we are supposed to be getting 
>rid of.
>
>You want ME to pay for YOUR road!!!!
>
>No way, buddy.  Buy your own road.

  A problem that was mentioned during the PBS marathon is that we are spending 
way too few of our dollars on infrastructure and too many on entitlements.  We 
have actually implemented the "Buy your own road" philosophy.  In So. Calif., 
we now have a private toll road because the government doesn't have the money 
to build the needed highways even though my state and property taxes are sky 
high.  We are doing something seriously wrong and unless we fix the mess soon, 
we're just dumping it on our children and grandchildren to fix.  We shouldn't 
be too surprised if they aren't kind to us when they have to fix the economic 
mess.

  As for education, we are spending a fortune on public education for the poor 
(and the rest of us) and we don't seem to be getting much for it.  I suspect 
school vouchers will become a reality everywhere before too long.  Then maybe 
the bloated federal education bureaucracy will implode and we can get back to 
readin', 'ritin' and 'rithmetic -- you know -- those things that give job 
skills.

			SQ

RE: .23 

>See?  Everybody wins!
>
>Tom
>
>PS: How'd ya like to buy a bridge?  (cheap!)

I wuz just kidding.

> Well, if they're paying the 28% or whatever now and this is replaced
> by 17% I dare say they'll be paying a lot less.  
    
    Not necessarily.  Remember, they also lose all their deductions
    so they might be paying 17% on a lot more money.  A smaller piece of a
    larger pie can be better than a larget piece of a smaller pie.
    
    I don't like everything about Steve Forbe's plan, for example, I would
    tax dividends and capital gains as income.  It just isn't politically
    feasible to do likewise.  
    
    To address the double of taxation of dividends, I would not have
    companies pay taxes on dividends they pay out.  To address capital
    gains, I'd keep the IRAs with two modifications:
    
            1. No limits on who and how much you can put into an IRA
        
            2. No early withdrawal penalty
    
    I would not allow any deductions (other than the IRA) but would accept
    charitable deductions and home mortgage deductions (if that's what it
    took to get the bill passed).
    
                                    August

    
    
    How would losing the mortgage deduction affect the value of
    houses?
    
    
    Bart
    

    RE .25
    
>    If everybody is going to pay less taxes how are we going to pay for
>     New Roads, provide the poor with educational opportunities as well as
>    making sure we have a safe and healthy environment.
    
    Everybody will not pay less taxes. We are talking about a cut
    in tax *rates*. Please read .18 for the theory as to why a cut
    in rates does not mean a cut in taxes collected.


    RE .27,.28

    Nice notes.

    					Ed

>   How would losing the mortgage deduction affect the value of
>   houses?
    
    Without attaching any emotional/political evaluations: it would cause
    the prices of houses to fall, because of reduced demand. For example:
    prospective homebuyers currently enjoy a subsidy. Without that subsidy
    some would be unable to buy homes at the current price, others would
    decide to spend their money on vacations or better schooling for their
    children instead of on a home (or nicer home).
    
      John

    re: .30
    
    If there is no penalty on IRA early withdraws, then, what is the
    difference between an IRA account and a regular savings account? More
    precisely, who will open a regular savings account?
    
    re: .33
    
    I understand your thinking. However, with a reduced tax rate,
    hopefully, people will have more money in their pockets. Therefore, 
    they can afford to buy more expensive things. On the other side,
    without the mortgage deduction, the rental market may also go up.
    People got to have a place to live. So, their choice is between paying
    a higher rent, or buying a place without the benefit of tax deduction. 
    Which way is the RE market going to play out if the flat tax does get
    implemented? I don't think anybody really knows. We'll just have to
    find it out when the time comes.
                     
    Mike

    The mortgage tax deduction reduces the effective interest rate you pay
    on your mortgage.  Instead of paying all the interest yourself, the
    government picks up approximately one quarter of it, (using your tax
    money of course).  If the deduction it went away, it would have the
    same effect as interest rates rising by 1/3.  
    
    
    > If there is no penalty on IRA early withdraws, then, what is the
    > difference between an IRA account and a regular savings account? More
    > precisely, who will open a regular savings account?
    
    You would pay tax on interest earned on the regular savings account but
    not on the IRA account.  I doubt if many people would use a regular
    savings account.  Is this a problem?
    
                                                August
    

    re: -1
    
    It is not a problem for me. Is it a problem for anybody?... We need to
    find out.
    
    Mike

    re: .30
    
    Your campaign slogan could be:
    
    "August in November"
    
    :-)  mark

    re: flat tax, real estate
    I would imagine there would be quite a few bankruptcies with
    yuppy couples mortgaged to the hilt (with the standard issue
    Cherokee + BMW leasemobiles in the driveway) and living from
    paycheck to paycheck.  Actually "nebbies" (negative equity
    baby boomers) is the acronym; no lack of 'em around here.
    The $300k priced houses should drop like a rock.
    .02 Kratz

    
    re. flat tax and real estate
    
    I believe most statements have been too simplistic and pessimistic. 
    Many factors operate in a system that is in equilibrium.
    
    Housing Prices
    Interest Rates
    Governement Subsidy (the mortgage deduction)
    Disposable Income of Possible Purchasers
    Tax Rates
    
    Many notes imply that housing price will get killed because of
    effective 1/3 rise in the interest rate.  That assues all the other
    factors stay constant and they won't. Sure housing prices will come
    down some.  I would also expect interest rates to come down (if banks
    are asking 6% for a mortgage {or about 4% after taxes} the market will
    try to correct back to the 4%.  If the mortage deduction loss is offset
    by a tax rate decrease the effect on home owners will be much much less
    than the often stated 1/3 effect.  If the deduction removal is done
    revenue neutral than home owners will be taking a tax hit while
    renters will be getting a tax break increasing their ability to
    purchase homes.  It is far from clear there will be a enormous negative
    impact to the housing market IMO.
    
    Greg
    
                                                      

>>    > If there is no penalty on IRA early withdraws, then, what is the
>>    > difference between an IRA account and a regular savings account? More
>>    > precisely, who will open a regular savings account?
>>    
>>    You would pay tax on interest earned on the regular savings account but
>>    not on the IRA account.  I doubt if many people would use a regular
>>    savings account.  Is this a problem?

I assume that, as is currently true, withdrawals from your proposed IRA would
be taxed as income, but that there would be no extra early withdrawal penalty. 
Is this correct?

If this is not correct, I fail to see what an investor is giving up in return
for the tax-free nature of the IRA.  (That is, if there's nothing different,
why not just declare all investment accounts to be IRAs?)

						Brian

    You are correct, withdrawals from the IRA are income and are taxable. 
    
    > Why not just declare all investment accounts to be IRAs?
    
    That's what I want.  All investments may be done tax free.  You pay tax
    only when you take money out of the investment that you do not
    immediately reinvest.   I used the IRA example since it seemed a simple
    explanation.  Perhaps it wasn't.
    
                                        August

I like the idea.  This is as close as one will ever get to consumption
based taxation.  Also note that you are only defering the taxes on the
accrued investment, it is not tax-free.

It is easy enough to do within the context of mutual funds or interest
bearing account.

How would you do this with regular brokerage account or do you even want
that?  One would think you would like to discourage frequent trading if the
true investment is the goal.

- Vikas

> One would think you would like to discourage frequent trading if the
> true investment is the goal.
    
    No, this is not right. Tax policy makes for poor social engineering.
    
    When you go to sell your stock, or whatever, you want a ton of traders
    hovering around the pit area, all competing with one another. That is
    what guarantees you a fair price for your sale. A lot of these traders
    will buy and sell repeatedly during the day. If the tax police decide
    to treat short term capital gains much worse than long term, then you
    are telling those traders to take a hike. Liquidity suffers and your
    transaction costs increase -- YOU suffer too, with no compensation.
    
    I like the idea of having some of my pre-tax income sent directly to
    a brokerage account, and being taxed only on withdrawals. But the time
    delta between deposit and withdrawal should be MY choice based on my
    personal needs -- not dictated by what some paper-pusher deems best
    for the economy.
    
    Hmmm, maybe that is too political a statement. The point is that you
    need a liquid aftermarket even if your time horizon is measured in
    decades. It's the frequent, short-term traders who make a liquid
    aftermarket possible. I haven't heard any counter-argument that says
    good things happen when people are prevented from taking profits, which
    is what you get when you punish the short-term trader.
    
      John
    
    p.s., I'm selling some funds today, which looks to be an up day. But
    I'm not motivated by profit, no sir, I want to be sure others have the
    opportunity to buy as cheaply as possible. The way to do that is sell
    what I can. Of course I'll be looking for a low price to buy back in,
    so those who want to sell then will have somebody to buy their stock.
    My invisible hands never leave my arm...

Don't IRA's allow you to run a regular brokerage account?  If not, then I
shouldn't use IRA's as shorthand for what I would like to see. I have no
desire to discourage frequent trading.  (I've got to keep the broker's
employed don't I.)

                                            August

    
    
    re. 39
    
    Interest rates may come down some as you suggest, but I doubt the
    elasticity is such that the rate would reduce enough to fully
    compensate for the loss of the mortgage deduction.  This is because
    interest rates currently are already so low that "other factors" would
    prevent long term rates from falling too much lower. 
    
    
    Kaizad
    

In Note 967.33 John EVMS::HALLYB suggested that losing the mortgage deduction 
would cause

    the prices of houses to fall, because of reduced demand. For example:
    prospective homebuyers currently enjoy a subsidy. Without that subsidy
    some would be unable to buy homes at the current price, others would
    decide to spend their money on vacations or better schooling for their
    children instead of on a home (or nicer home).
    
John is right.  (He usually is.)   However, he has omitted an additional
and important point. 

While the value (price) of homes would fall, the amount of your mortgage 
would not.  However, your ability to pay your mortage payments would fall.
This is based on the assumption that the total amount of taxes colleced
would have to remaine about the same.  Therefore, people who LOOSE mortgage
deductions would end up paying more taxes than those who don't have 
mortgage deductions to loose.  

So, all of a sudden the acutal part (percent) of your disposable (after tax) 
income required to pay you mortgage goes up.  And, adding insult to injury, 
the value of you home has gone down.  What do YOU think happens next?

I think that you and millions of other homeowners would default on there
mortgages.  And I think that the S & L mess was *nothing* compared to the
events that would follow.

>While the value (price) of homes would fall, the amount of your mortgage 
>would not.  However, your ability to pay your mortage payments would fall.
>This is based on the assumption that the total amount of taxes colleced
>would have to remaine about the same.  Therefore, people who LOOSE mortgage
>deductions would end up paying more taxes than those who don't have 
>mortgage deductions to loose.

I'm still not convinced the values will fall that much and I doubt anyone 
knows for sure.  Losing a mortgage deduction does not mean you will pay 
more taxes.  Whether your tax bite goes up or down would depend on how much 
mortgage interest you pay.  Someone with a really old mortgage probably 
doesn't have much interest to deduct anymore.  Someone with a small condo 
or starter home would be in the same position.  However, if you have a jumbo 
loan with killer interest payments, then your deduction loss would be more 
painful.

>So, all of a sudden the acutal part (percent) of your disposable (after tax) 
>income required to pay you mortgage goes up.  And, adding insult to injury, 
>the value of you home has gone down.  What do YOU think happens next?

Oh probably what's already happened to my husband and me.  We bought our 
house in Northern California just before the prices started to drop about 5 
years ago.  We also lost a dependent.  Our deductions went down; the value 
of our house went down; raises are lousy.  So we drive a 10 year old car and
won't be buying a new one soon.  The house is too important.  We did 
refinance to take advantage of the dramatic decline in interest rates (a 
drop of 3% for us) so the payments are a lot lower.  Of course, now our 
interest deduction is lower and we're losing another dependent, so....  As 
Roseanne Roseannadanna used to say, It's always something."

>I think that you and millions of other homeowners would default on there
>mortgages.  And I think that the S & L mess was *nothing* compared to the
>events that would follow.

If this does happen, I would put some of the blame on the lenders for being 
willing to accept 5% down payments and high debt to income ratios, not to 
mention those hideous equity line of credit loans that let you borrow 100%
of the value of your home.  Those LOCs would become a lot less popular and 
maybe people would stop borrowing so heavily against their home.  I also don't 
think the number of people who would actually default would be that high.  
Lenders would probably be very willing to negotiate new terms rather than face 
foreclosure on all that property.  Admittedly, relocation would be more 
difficult but many people have already faced that problem even with the 
mortgage deduction.

Food for thought:  A very good friend of mine once said that spending a dollar 
just to save 50 cents is not a good idea.  Keep it in your pocket and save a 
dollar unless you were planning to spend it anyway.  Better yet, invest it 
and make even more.  Just don't ever let the tax code itself drive your 
financial decisions.  I've found those to be good words to live by.  And 
although I personally would hate to lose the deduction I still think a flat
tax is the right thing for the economy.

			SQ

It makes sense to me that values would fall. The mortgage interest
deduction is one benefit of owning a home that makes it preferable to
renting, which from some perspectives is appealing. Take that
deduction away, and the value of ownership begins to drop compared to
renting.

Pete

    
    	As a new Condo owner last year and someone just starting to look
    at his taxes. The mortgage interest deduction is not that much of a
    difference. Yes, I get to claim my mortgage interest, but I lose my
    personal deduction of $3900. Say I paid $6000 in interest, I claim
    an extra $2100. Which ends up being about an extra $500-$600 back
    in taxes. Yes, it is something extra back and I'm not complaining.
    In reading/looking at all of these flat tax proposal's. All I here
    about is familys, what about people who are single? I'm not bashing
    having a family, i plan on having one eventually. However having a
    family is each couples choice most of the time. Yet, it seems you
    get more benefits from the goverment by having children. I'd like
    to see how a flat tax effects single people in america. It took me
    a while to save money for a down payment. I'd like to see something
    like an IRA setup for young single people who save to buy a house.
    You get to put so much money a year say $2k like an IRA, into a
    down payment fund. You can then deduct this money on your taxes just
    like a IRA. If you don't use the money for a down payment, then you
    should pay penaltys.
    
    Ron

    Mortgage interest rates rise and fall all the time.  When mortgage
    rates where at 10% in the not too distant past (and I had a mortgage at
    an even higher rate), what happened to home prices?  I know it wasn't a
    catastrophe overall though I know of individuals with high mortgages at
    high interest rates who owe more than the house is worth so they can't
    refinance and they don't want to sell (and take the loss).  

    RE .45
    
    > compensate for the loss of the mortgage deduction.  This is because
    > interest rates currently are already so low that "other factors" would
    > prevent long term rates from falling too much lower. 
    
    I wish I had my data from my economics class a year ago...Interest
    rates are still historically high.  The 'normal' interest rate also
    known in some circles as the 'natural' interest rates is between 3% and
    4% (closer to 4).  This is based on data going back to around the turn
    of the century (and even before).
    
    Most economists agree that interest rates are being propped up by the
    government's inability to balance the budget...which also help cause
    trade deficits.  Isn't the goal here to help balance the budget and get
    governemnt off our backs?  If this happens, yes there will be changes
    but the net result will shift back to 'equilibrium' which I have to
    believe would be lower rates (as long as taxes are decreased along with
    a greater decrease in spending).
    
    John
    -completing an Economics degree

    
    
    Inflation has averaged 3% or more in the last many decades.  I agree
    that a real long term rate of 3 to 4% is feasible.  However, with 3%
    inflation on top of that, nominal interest rates can't go much below 
    6-7%.  One could argue that inflation will come down too, since
    deficit might.  However, I would expect that bond traders would want to
    see evidence that the inflation trend from the last many decades
    had in fact seen a permanent correction.  This could take many years...
    Besides, inflation may not come down even if fiscal deficits do.
    
    Kaizad

	Geez, I take some vacation days and I come back to find it's not
	just Mike & I discussing the flat tax :-)

	I have a question I haven't heard an answer to yet since all this
	budget debate began in DC.  We all know the current plans are said
	"should" balance the budget in seven (7) years (though as we know
	from history, making econonmic forecasts even one year out [which
	all budgets do] to estimate revenue and spending is difficult,
	never mind 7 or more years out, never mind that the Republican
	budget plan front-ends the tax cuts and back-ends [ie. closer
	to the end of the 7 years] most of the spending cuts, actually
	increasing the deficit the first couple years I believe).  My
	question is ....

	*After* the federal government actually gets a fiscal year without
	a deficit, and assuming from then on it stays balanced, how long
	will it take for the national debt to go to zero (0)?  My guess
	is 30 years since I believe that's the longest bond the government
	issues, and with a balanced fiscal year, we govt. won't be issuing
	any new bonds, so it will take 30 years before the last bond is
	(can be?) called in?

	Which leads me right into to another question, are all the long
	bonds the government issues non-callable (ie. can't be paid off
	earlier than term)?  If not, then .....

	Wouldn't it be nice if instead of shooting for just a balanced
	budget, wouldn't it be nice to shoot for a budget with a surplus
	(without raising or creating new taxes to do it of course) and pay
	off the national debt sooner than 37 years from now ..... (?)

Here's some more info on the Forbes Flat Tax "proposal" (ie. working paper :-)

	I don't know about everyone else who lives in NH, but I've been
	getting bulk rate mailings from Forbes campain it seems on average
	of every other day.  Well one of these mailings has a small (and
	hard to read the numbers but not impossible) fascimile of the
	"FORBES FLAT TAX FORM" for the "Individual Wage Tax" (which is
	important to note, while the proposal has a very simple tax form
	for individuals, my understanding that while it may be simplified
	from todays tax code, the form for businesses won't be so simple).

	Here are the numbers from that tax form for "allowanaces":
		Married filing jointly:			$26,200
		Single					$13,100
		Single head of household		$17,200
		Per dependent (not inc self or spouse)	$ 5,300

	I also called up his NH campain headquarters (603-628-1996) to
	get some additional info that I need in order to compute what
	my tax liability would be under the plan.  In my case I own
	rental property (smalltime as you can get, owner-occupied 2-family)
	and wanted to know if I would be taxed on this.  The campain
	worker believed that under Forbes plan this would be considered
	business income and would be taxed.  But wasn't sure if there was
	exceptions (like under NH law I only have to pay NH's business profits
	tax if I own more than 3 [or 4?] rental units), and if I was taxed
	on it, what would be deductable against rent(s) (like depretiation).

	The campain worker did call me back over the weekend and left a
	voice mail telling me Forbes would be in holding a couple of
	Town (style :-) Meetings this Sat. (Feb. 3rd), 1st at Hesser
	College in Manchester at 10am, and then at Oyster River HS in Durham
	at 2pm.

	And the reason I said "working paper" in the 1st line of this note
	is that the campain worker was quite forward and told me that not
	everything is written down, and that if elected President, that
	the plan would probably change alot in negotiations (at least
	the campain worker is a realist :-)

	Also FWIW (though I couldn't find any real details on the tax plan
	here either, if someone does please report back here) the Forbes
	(WWW) Web Page is http://www.forbes96.com

> ... I do agree strongly that the IRS is a drain on the economy and should
> be abolished.

	So are toll booths in NH but that's another debate :-)
	But seriously, the IRS can never be abolished (though could be
	replaced or reassigned to another government agency, but that
	only abolishes the IRS in name only) completely.  You need some
	mechanism in order to achive compliance.  Get rid of the tax
	police, and who's going to pay taxes if everyone knows no one's
	going to come after you if you don't?

	With today's tax system it's actually *very* important to have the
	IRS, assuming you can keep them focused on how they spend their
	budget.  From my understanding, history has already shown that
	reducing the budget of the IRS is penny wise but dollar foolish.
	While there is a short-term savings (penny wise), more revenue
	(dollars) is lost due to the resulant decrease in enforcement.

	However with a flat tax, or the key of the flat tax or any other
	similiar system, is in the simplification of the tax code/system.
	This allows the size of the IRS to be shrunk substantially (depending
	on the level of simplification) as less workers are needed to not
	only process claims, but also for enforcement when there aren't
	as many loopholes.  The simpler the tax code also the easier it
	is to continue on the trend toward computerization (which also
	reduces head count in the IRS), ....

	BTW, does anyone have any relatively recent figures on how much
	estimated revenue is not collected each year due to non-filers and
	tax cheats?  I believe it's at least in the billions, isn't it?

> Higher taxes cripple growth because we have less money to invest.

	Hmm, I believe this is debatable, to a point that is :-)  The
	tax money we give the government doesn't just disappear (unless
	Fawn Hall now works at the IRS :-).

	Raising taxes, just like lowering taxes, only changes where and
	how that money is invested.  The money still flows through the
	economy, it just takes a different path.  However it seems to
	flow alot slower when the government is in the path.  Bypass the
	government (less taxes) and the money appears to change hands
	much more frequently, which is the theory behind why it increases
	revenue (as the IRS usually gets a % each time money changes hands).

> Sure wish I had a crystal ball or a PhD in Economics :-)

	Stick with the crystal ball, your predictions will have a
	better chance of being correct than someone with a PhD in
	Economics :-)

.13>    If you abolish IRS, you will be killing an
.13>    entire service industry devoted to tax consulting, tax management and
.13>    tax preparation.
>     ... meaning those folks will have to find something PRODUCTIVE to do,
>     instead of duking it out with the IRS. It's like two kids on the block
>     spending all their time fighting. If instead you put them to work doing
>     something useful, both they and society gain.

	The analogy doesn't quite fit in the short term however (long-term
	you are correct).  In the short-term you've put alot of people out
	of work and on to the un-employment payrolls.  People with families,
	who's skills, even if applicable to another field, would flood the
	market (potentially with a ripple effect of driving down salaries
	in those other fields as supply of talent out-strips demand).
	We are not talking about putting a small cottage industry out of
	work here, this is a *big* industry (though how big I don't know,
	but Forbes quotes the size of the IRS at 115,000, and my guess is
	many times more than that on the service industry mentioned above).

	That does *not* mean we shouldn't do it, but what it does mean is
	that it needs to be planned for somehow.

> .16>   Forbe's has a ton to gain from this.  His family fortune will be
> .16>   distributed in the next five years or so.  His plan calls for no
> .16>   inheritance tax.  What would the estate tax on 1.5 billion be? 
>     50%, though I heard he was worth only $400 million.

	Forbes Jr. from what I've heard may be the biggest heir to the
	estate, but the rest of the wealth that is or will be spread around
	from the estate totals more than Jr.'s portion

> Independent of the total, note that this is taxing money a second
> (third, fourth) time.

	??

	If each dollar was only taxed once we'd have to keep printing
	more dollars.  I believe the debate you are raising here is
	that why should money that was taxed when earned by one family
	member be taxed on that money when it changes hands in the form
	of an estate (vs. when it changes hands while the person who earned
	it is living)??

> It has become fashionable to take from the rich (via taxes), and
> our tax system has grown up around this notion, with much higher rates
> applied to those with large incomes.

	Also don't forget however that it's a graduated tax rates, which
	is often forgotton.  When you step into a higher tax bracket from
	a lower one, *all* your income is *not* taxed at the higher rate,
	only the income *above* the step.

	This certainly increases the individual's average tax rate,
	but in a more gradual fashion (unlike the sudden absolute
	change in the max. contribution from 12% to 8% into SAVE
	once you hit $66k).

	Also the various tax brackets are close together, except for the
	first step (from the 15% to 28% bracket).

	From my 1994's 1040 the tax brackets were (I believe the income
	amounts are adjusted each year so this won't be correct for 1995
	but is irrelvant for demostration purposes :-)

From			To		Spread		Tax Rate
					(To - From)
       0		$ 22,750	$ 22,750	15%
$ 22,751		$ 55,100	$ 32,350	28%
$ 55,101		$115,000	$ 59,900	31%
$115,001		$250,000	$135,000	36%
$250,001		inifinity			39.6%

	so someone with taxable (ie. after adjustments/deductions/etc)
	income of $30k has a tax liability of 15% of $22,750, plus
	28% of $7,500, equals $5,442.50 or 18.141%.  with taxable income
	of $35k it ups you to 19.55%.  And someone with taxable income
	of $200k it's 30.9% (and remember this is taxable income, not
	gross income, those %'s of gross income give even smaller effective
	tax rates, especially when you take advantage of tax shelters
	even us non-rich can use like our 401K's).

	Some say having multiple (vs. single, ala flat) tax rates/brackets
	results in individuals for-going additional income because
	"so much" of that income will just go to Uncle Sam once you cross
	tax brackets.  It sounds nice, and it may influence some people,
	on the whole I think people would rather still be earning the
	higher incomes and paying a little more taxes on that additional
	income, than to for-go the income altogether.  At least I can speak
	for myself and say "yes", I'd rather be making what I make now,
	than be in the 15% tax bracket, and I still want to make more,
	even if it pushes me into the next higher tax bracket .....

	Also to keep in mind is that when you start getting into the
	higher tax brackets, that additional income is no longer going
	to pay for the min. standard of living, but to a higher standard
	of living.  I know my standard of living is higher than my brother's,
	and I can't say I "deserve" it more than he does because I worked
	harder for it as in reality he works harder than I do, often working
	a 2nd job to get a few extra dollars.  I certainly have no resentment
	that my brother, or anyone like him, pays a lower effective tax
	rate than I do.  On the other hand I do resent the fact that there
	are many people making many fold more than I do and due to being able
	to take advantage of tax shelters/loopholes the rest of us can only
	dream of, pay an effective tax rate less than I do.  And a flat tax
	doesn't solve that problem (in reality it makes it worse).

>>    If everybody is going to pay less taxes how are we going to pay for
>>     New Roads, provide the poor with educational opportunities as well as
>>    making sure we have a safe and healthy environment.
> All of these are part of the big government we are supposed to be getting 
> rid of.

	But are we really getting rid of it or are we shifting it, as the
	Republicans would say, from the Federal Government to the State
	Governments?

	If the Fed's aren't paying, and things still need funding, the
	money's got to come from somewhere.  This may or may not be good
	for State's like NH where NH residents pay more in Federal tax
	dollars than the State of NH get's back in Federal dollars for
	programs.  Those residents in State's on the other side of the coin
	today may get a cold wake up call farther down the line .....

     re: flat tax and abolishing mortgage interest deduction
    
     I appreciate the rational of home owningship, but with the current
     residential home/mortgage industry I really believe that a big portion
     of the American population has been taken for a long arduous ride.
    
     I seldom see a checklist to evaluate if one would be a suitable
     candidate for a home mortgage (except the one that qualifies you based
     on out creditworthiness). I think we tend to forget that in order to
     retrieve One dollar from taxes, we already have spent multiple more
     (depending on your tax bracket). The worse, most damaging aspect of
     the current scheme is the affordability falsehood that the system
     perpetuates. They make you think you can afford the house! 
     To me, here's a checklist to determine if I should get sucked in 
     getting a home mortgage:
    
     1- Am I going to live in this house for at least 5-7 years. 
        I doubt that much. We move about too much. Y
        Yes = 1 point, No = -3 points.
        
        
        If no, you get -3 points! Why? You would not have built up enough
        equity in it to matter, unless you have ploughed in a huge down
    	payment (see #2). Also you are taking a risk that you'd make up
        by home appreciation when you sell. Well, we know where that has been.
    
     2- What's a large downpayment? 20% if you want to avoid the PMI
        (Private Motgage Insurance) which lasts THROUGHOUT your mortgage!
    	PMI is NOT cheap. One can do a lot to make that 20% grow though
        shrewd investments instead.
    	
     3- Ok, now that the thrill of the hunt is over... You have your 
        dream house. Of course you pay those despicable points in order
        to play. There's insurance, property taxes, maintenance, more
        spending to keep up with the Joneses...so does all the expenses to
        support a house worth it? Just how much in totality is the
        so-called tax subsidy worth to your bottom line?
    
    
    So what's the longterm downside should the mortgage interest vanish.
    Many of you mention the"sky is falling down" scenarios. I don't think
    it'll happen, at least not immediately, if at all. This is my spin:
    
    Demand for rental housing will go up, so will supply. Renters (esp.
    middle class) will demand better, classier rentals, this would drive up
    competition, so overall there'll be net-net more rental housing
    available for a bigger portion of the population.
    
    Is this bad?
     
    Society might also become less materialistic, maybe there'll be less
    "nebbies". Is this really bad? We are so comsumption driven as it is.
                                             

>     re. flat tax and real estate
>     
>     I believe most statements have been too simplistic and pessimistic. 
>     Many factors operate in a system that is in equilibrium.
>     .......

	Don't forget however that in any system that is in a state of
	equilibrium, most systems don't instantly re-archive
	equilibrium.  There is a state of flux.  It's during that
	state, the duration of which we could estimate if we had an
	accurate model of the system, that "could" (I don't say "will" :-)
	cause alot of damage to those living in the system (while for
	others there can actually be money to be made :-)

> I like the idea.  This is as close as one will ever get to consumption
> based taxation.  Also note that you are only defering the taxes on the
> accrued investment, it is not tax-free.

	Well it is tax-free I believe in today's system (and in Forbes
	plan if you completely get rid of the inheritence tax), assuming
	you die before you withdraw it.

	Speaking of which, what does Forbes plan do with IRA's and 401k
	type plans?

    Jeff, do you feel you've caught up with this Notes File now?  :-)
    
    Maybe I am wrong here. But, I don't think we are doing much real
    meaningful work here by analyzing Forbes' or Grahm's or anybody else's
    flat tax proposals in every bit details. After all, our Constitution
    says that it is the Congress who makes the laws. The president simply
    enforces them. To me, it is more important that the president is in
    general agreement with the idea. Then, the details should be left to 
    Congress to work out. So, *if* the flat tax (or consumption tax) idea 
    does get pushed through, it can be quite different from what you are 
    looking at today. 
    
    Mike 

    RE .53

>	never mind that the Republican
>	budget plan front-ends the tax cuts and back-ends [ie. closer
>	to the end of the 7 years] most of the spending cuts, actually
>	increasing the deficit the first couple years I believe).

    At least the Republican plan specifies where those cuts will come
    from. The reason for the increasing cuts in later years is due
    to the compounded savings in the Medicare/Medicaid programs.

    The president's plan on the other hand requires congress to cut 
    *all* discretionary domestic spending 33% in the year 2001(or 2). He
    does not say which programs should be cut but it might include
    education, welfare, environment... It also requires that his
    proposed tax cut be repealed in the year 2000 (an election year).

    Now....which plan do you consider more realistic?

>	*After* the federal government actually gets a fiscal year without
>	a deficit, and assuming from then on it stays balanced, how long
>	will it take for the national debt to go to zero (0)?  

    Under both plans, the budget is again in deficit in year 8, and
    deficits continue to increase as time goes on. The main reason
    for this is that entitlement spending continues to rise much
    faster than the economy. For example, even with the Republican
    plan to "slash" Medicare, it still goes broke around the year 2009.
    (as opposed to 2006 under Clinton's proposed changes).

>	Which leads me right into to another question, are all the long
>	bonds the government issues non-callable (ie. can't be paid off
>	earlier than term)? 

    Yes, they are non-callable.

>	Wouldn't it be nice if instead of shooting for just a balanced
>	budget, wouldn't it be nice to shoot for a budget with a surplus
>	(without raising or creating new taxes to do it of course) and pay
>	off the national debt sooner than 37 years from now ..... (?)

    Yup...but until the growth of entitlement spending is controlled, this
    is a dream.

    						Ed

If the flat tax is such a bad idea, why isn't there a clamour for the
repeal of the social security tax?  Compare the work required to fill out
your income tax to work required to compute the amount of social security
tax you owe.

                                            August G. Reinig

    re: .65
    
    Also interesting that Social Security has a limit...
    
    
    Bart
    

> Jeff, do you feel you've caught up with this Notes File now?  :-)

	Yup, at least with this notesfile :-)  I'm still behind in several
	others though :-(

> Maybe I am wrong here. But, I don't think we are doing much real
> meaningful work here by analyzing Forbes' or Grahm's or anybody else's
> flat tax proposals in every bit details.

	When you have a canidate whose platform is their flat tax proposal
	then MHO is that it is very meaningful.  The other canidates with
	flat tax proposals (or we could just call them all "re-vamp the
	tax system" proposals since the only thing common between them is
	a single income tax rate for individuals, a flat tax does not
	necessarly mean simplification of the tax codes as you could leave
	the tax code as it is today and simply reduce the number of tax
	brackets to one (1) [Regan had already reduced the number of tax
	brackets when he was in office] and set the single rate at lets
	say 20%).

> After all, our Constitution says that it is the Congress who makes the laws.
> The president simply enforces them.

	That may be what it says, but since I've been of voting age all
	the Presidents I know do more than simply enforce the laws, they
	all have also taken a so-called leadership position and lobbied
	congress for their agenda, and on occasion has enacted their own
	laws when legal in the form of executive orders.  Plus of course
	the President provides one of the several checks and balances as
	to what becomes law by signing legislation into law, or veto'ing
	them (either by pen or by tabling them).

> So, *if* the flat tax (or consumption tax) idea does get pushed through,
> it can be quite different from what you are looking at today. 
     ^^^^^^

	I'd used stronger language than that and say it "will be" :-)

>>	*After* the federal government actually gets a fiscal year without
>>	a deficit, and assuming from then on it stays balanced, how long
>>	will it take for the national debt to go to zero (0)?  
>     Under both plans, the budget is again in deficit in year 8, and
>     deficits continue to increase as time goes on.

	So this implies neither/none of the plans have a goal of actually
	getting rid of the national debt?

    Re .last
    
>	So this implies neither/none of the plans have a goal of actually
>	getting rid of the national debt?
    
    That is correct. Getting rid of the debt, and even controling the
    deficit 10 years from now, will require significant changes to
    the entitlement plans. Given our political system, and an
    ignorant/greedy public, this is a very difficult thing to do.
    
    						Ed
    

    Re: will require significant changes to
        the entitlement plans. Given our political system, and an
        ignorant/greedy public, this is a very difficult thing to do.
    
    Excuse me.  If you add up the amount I've been taxed for social
    security for the 35+ years I've been working, and figure out what
    that would amount to if it had been invested at, say, 6%, I could
    stop working this very minute and never have to lift a finger for the
    rest of my life, regardless of the rest of my savings.  Expecting
    a decent social security payback is not "ignorant/greedy".
    

    Ah, but the current issue is not Social Security.  It's the
    eleventy-thousand other entitlement programs that the people think they
    'deserve' by virtue of thier being alive and breathing.

>    Excuse me.  If you add up the amount I've been taxed for social
>    security for the 35+ years I've been working, and figure out what
>    that would amount to if it had been invested at, say, 6%, I could
>    stop working this very minute and never have to lift a finger for the
>    rest of my life, regardless of the rest of my savings.  Expecting
>    a decent social security payback is not "ignorant/greedy".

 Agreed.  However, that isn't the social security system as we know it.  We 
are NOT making contributions to our own ss pension.  We are being taxed to 
pay for the current crop of ss recipients: retirees, widows and orphans, etc.
Our ss tax is one of the biggest hoaxes we've bought into as a nation.  It's 
the only tax that I know of that we can't deduct on our 1040 and that helps 
to perpetuate the myth that it is a retirement system.

 This is why we need 401k, IRA and regular pensions to fund our retirements.  
It's also why expecting a decent payback is in fact greedy because we will be 
doing it on the backs of our children and grandchildren.  This is the harsh 
reality, no matter what we think it "should" be.

 (Momentary political rathole:  this probably is contributing to the mass 
exodus from congress by many career politicians -- they know it's going to hit 
the fan soon.  Another example: the FAA equipment is falling apart, but those 
airfare taxes we've paid into for years went to the general budget instead of 
into equipment replacement -- vaccuum tubes for cryin' out loud!!!  We're 
letting our infrastructure rot and it's going to get ugly.  Very hard choices 
ahead -- just how angry do we have to get as a nation before we really go 
after the bloated DC bureaucracies that are draining our economy?!)

 During the Jim Lehrer marathon, one of the panel of so-called experts said 
that he'd only agree that a flat tax was a good idea if it included the 
payroll tax (ss and medicare) and I'm inclined to agree.  It would make the 
ballgame a little fairer in that the rich (insert smiley face) would no 
longer max out on the payroll tax.

 While Forbes' flat tax doesn't include the payroll tax, he does have a plan 
to set aside a percentage of our ss contributions into a fund that would belong
to us when we retire, with the remainder continuing to pay for the current 
retirees, etc.  I for one certainly agree that this subject is just picking 
up steam and the more we talk about it now the better we'll be able to judge
the soundness of any scheme put before us.

 BTW, Forbes doesn't have the same commitment to a balanced budget that other 
condidates do so I'm still not too sure about him.  In his favor, he does 
preach optimism and growth which sure beats doom and gloom any day.

As always, still looking for that crystal ball.

				SQ

    Re .70 - Karen,

    Expecting a "decent" payback is not greedy. The difficulty is that
    today's retirees are getting far more than a decent payback. Yet many
    (along with many politicians) scream bloody murder whenever any 
    idea of cutting their payback is mentioned. 

    1995 was the first year that *any* Social Security recipient actually
    got back a "decent" (actuarially fair) return. And that is only the case 
    for unmarried men who contributed at the maximum for their entire working 
    life. All others are receiving more, most much more. For Medicare it
    is even worse.

    This is what makes addressing entitlements soon even more important.
    As younger people like yourself retire, they can make a fair claim that 
    their benefits are justified because they've paid in so much. Yet to
    continue the current level of benefits will require workers in the
    future to pay (something like) a 30% SS tax. That's not gonna happen.

    To tie this back to the Flat Tax....what I like the most about
    Forbes is that he's talking about making major changes to the SS system
    because he's willing to tell the truth about it's future collapse.

    						Ed

    re: .70
    
    Please don't take this personally. But, it's exactly because thoughts
    like that making the task of changing the social (in)security system so
    difficult. Yes, you have paid into the system and you expect to get
    something back. So did I and everyone reading this notes file. If you
    ask those retired people who are receiving SS checks, they will tell
    you the samething: "I have paid into the system. Now, I am getting my
    money back." Really? For alot of them, what they are getting back is
    far more than what they have paid in. But of course, they are not going
    to think that's unreasonable. What is the motivation? As pointed out
    in .69, greed! Yes, if the government had never collected SS tax and
    let you invest the money, you can be much better off. But, that is not
    the reality now. On top of that, for whatever surplus we had in the SS
    system, the government took it out and spent it all. There is no simple
    and easy answer for our SS problem. But, we've got to fix it. Yes,
    you/we have paid into the system. Yes, you/we may not get all (if any) 
    of your/our money back. But, if that is the only way to solve this
    problem, so be it. I have worked for many years and therefore I paid my
    shares of the SS tax. And, I still have many years to go. I am trying
    very hard to save as much as I can for my retirement. I do not expect
    to see any SS checks when I am ready to retire. But, I'd rather face
    the reality than leaving it to my next generation to hold the bag. 
    
    No, I do not think cutting off SS cold turkey and leave many elderlys
    in the cold is what should be done. However, cutting back on SS
    payments (and many many other entitlements) is a first step in the
    right direction. How about cutting back the SS tax and give people a
    chance to invest for their own future? How about provide more tax
    incentives for people who take the responsibility of planning/saving 
    for their own retirements? How about design a SS system that only
    allows people to take out that they have put in - unless they can prove 
    they really need the extra money to survive? How about an overall
    government policy and social structure that encourage and reward people
    to save? I can give you so many examples of people who are spending
    every penny they bring in and expecting to live on SS (ie. someone
    else's money) when they retire. Why these people are like that? Because
    our social structure rewards that kind of behavior. Just look at some of 
    the college financial aid systems and the current tax system, you'll
    understand what I am talking about. Our current tax system is broken.
    It must be fixed (though, as painful as it may be). We can not afford 
    to let this problem go on much longer. 
    
    Mike 

    Re: only the case for unmarried men who contributed at the maximum for
                                    !!!
        their entire working life.
    
    
    I believe .73 and .74 have been mislead by the bogus calculations
    I often see politicians cook up in this type of discussion -- those
    calcs sum up the tax and completely ignore the interest
    those amounts would have earned over the past several decades.
    
    Also, if I am paying less social security tax because I'm female,
    that's news to me.  So I'm kissing goodbye just as much tax
    as any male with the same income.
                                                

    We obviously cannot cutoff the elderly and disabled that have no other
    way to live but via Social Security.  Bad things do happen and people
    need help *temporarily*.  With these in mind I think we nedd to take
    the FICA and Medicare withholdings and turn them into what the really
    are....TAXES paying for social programs.  So increase the income tax
    appropriately to cover some of these while controlling the growth of
    the entitlements.
    
    Next, setup a program where we have a forced RETIREMENT INVESTMENT
    system where a portion of your income must be invested IN THE ECONOMY. 
    Most people do not have the smarts (today) to handle investments so
    make it easy like many 401Ks  (safe fund, middle of the road, and risky
    fund - select percentages).  Allow other people to manage their
    investments but they CANNOT withdraw until retirement.  Finally, send
    statements at least annually to show what the funds are worth.
    
    Even the people that do not have the smarts to invest today will
    quickly learn that saving / investing pays when they see a statement
    showing significant dollar amounts growing.  This can only help out
    country as saving = investment (which produces higher output per worker
    via increases in capital and technology).
    
    
    I know this is a bit simplistic.  For example what to do about bad
    investments leaving people with not enough to live on etc.  This is
    what debate is for though.  I just like the base idea.

> Also, if I am paying less social security tax because I'm female,
> that's news to me.  So I'm kissing goodbye just as much tax
> as any male with the same income.

	Now Karen, you know full well they weren't talking about "today's"
	females.  Those females collecting SS *now* (in general, remember
	we can always find exceptions to the rule, and it's flawed logic
	if one tries to dismiss a rule because there is an exception to
	the rule) are from past generations where 2-income families were
	*not* the norm (unlike today).

	In any case, I agree with those that say it's "greed" to expect
	payback for paying into SS your whole life.  I believe the original
	intent (and please correct me if I'm wrong, history is not my
	strongest subject) of SS was no different than the concept of
	a public insurance policy.  You pay insurance premiums, but you
	hope you never have to collect on the insurance!  Ie. SS was (or
	should be) designed to provide protection for those that have legit
	claims.  SS shouldn't be part of a retirement plan, but simply
	a last resort insurance policy.

	If everybody expected to be paid back for all those years they've
	paid premiums on their car & house insurance, no one would get
	anything (can you say chapter 11) as that's not how insurance works.

	I personally do *not* expect to be collecting anything from SS
	(if it still exists) when I retire, and I have no complaints about
	paying into a plan I hope I'll never need to collect on, assuming
	it works the way it should.  However it most definitely is not
	working the way it should, and it needs fixing.

>  BTW, Forbes doesn't have the same commitment to a balanced budget that other 
> condidates do so I'm still not too sure about him.  In his favor, he does 
> preach optimism and growth which sure beats doom and gloom any day.

	Why does preaching optimism beat gloom any day?  FWIW, a study
	was done recently I believe that studied a group of 100+ year
	old people.  One of the things that group of people had in common
	is they were skeptics.  I was going to say they were also pessimists
	(ie. doom/gloom) but now I'm not sure, anyone else read about that
	in a AP article 2-8 weeks ago?).

	Now back to the regularly scheduled program already in progress :-)

    Re: .77
    
    Ah, I forgot I was a member of a stereotyped group, not an
    individual.  Darn, where did I put my frilly little apron...
    

Social security is a TAX.  People receiving social security are getting
nothing more than WELFARE payments.  Once we all realize that, we can get
on with fixing the system.  The first thing should be to cut off all payments
to people who don't need it. (Pick your favorite income level.)  Anyone in 
the 20-40 age group should probably base their retirement plans without
including social security.  What year is it that the ratio of working
to receiving will be 2:1?  2020?

As far as the flat tax,  so far I haven't figured out how the Forbes
plan could possibly raise taxes on the middle class as some of the anti-Forbes
ads say.  The numbers just don't add up.  However,  if you cut the taxes
on *everybody*,  who is going to pay the bill?  I suspect that's just one
of the little tiny details for the congressional committees to figure out 
after the election....right,  I believe in Santa Clause...

Garry

> Ah, I forgot I was a member of a stereotyped group, not an
> individual.  Darn, where did I put my frilly little apron...

	Seeing you didn't use any :-)'s I have to assume you are serious
	in this comment.  If so, then it's full of BS (you should be
	a politition :-).  First off you know full well that you have
	to look at groups, looking at millions of individuals individually
	is useless.  And using the word "stereotype" instead of "statistical"
	to refer to the historical pattern that is undisputed fact is
	very clever :-)

	FWIW, I'm very "equal rights" and was even in support of the ERA.
	In fact I'm more "equal rights" than most females I know, so
	please don't label me sexist for *not* ignoring statistics.

1. ste.reo.type \'ster-e--*-.ti-p, 'stir-\ n [F ste`re`otype, fr. ste`re`- 
   stere- + type] 1: a plate made by molding a matrix of a printing surface 
   and making from this a cast in type metal 2: something conforming to a 
   fixed or general pattern; esp : a standardized mental picture held in 
   common by members of a group and representing an oversimplified opinion, 
   affective attitude, or uncritical judgment (as of a person, a race, an 
   issue, or an event)
2. stereotype vt 1: to make a stereotype from 2a: to repeat without 
   variation 2b: to develop a mental stereotype about - ste.reo.typ.er n

    Re .75 - Karen,

    The politician I quote in .73 is Patrick Moinihan (sp?). I think
    you'll agree that there are few people who know more about SS
    than Senator Moinihan.

    I know he does assume a rate of return on the money taken from pay. 
    I am not certain what rate he uses, but I believe it is inflation.

>   Re: only the case for unmarried men who contributed at the maximum for
>                                    !!!
>        their entire working life.

    The reason for "men" is that women have a longer life expectancy than
    men, and will therefore collect more from the system than a man.
    Of course both pay the same into the system, and both get the
    same amount per month out, but from a statistical point of view
    a woman will collect longer. 


    Remember, most of today's retirees paid a FICA tax rate of 2%, for
    most of their working lives. This is less than 1/3rd the rate we pay today.
    Further, the maximum contribution was much less. For example in the 
    late sixties the *maximum* someone could pay into SS in a single year 
    was less than $300, an amount less than 1/10th of today's max.

    In my .69 I used the term ignorant/greedy. This is because I 
    believe ignorance of the facts of the SS system are a much bigger 
    problem than greed when proposed changes to the system are mentioned.

					Ed

>	Why does preaching optimism beat gloom any day?  FWIW, a study
>	was done recently I believe that studied a group of 100+ year
>	old people.  One of the things that group of people had in common
>	is they were skeptics.  I was going to say they were also pessimists
>	(ie. doom/gloom) but now I'm not sure, anyone else read about that
>	in a AP article 2-8 weeks ago?).

I see a BIG difference between skepticism and doom and gloom.  Skepticism is
the healthy suspicion that the "facts" presented aren't quite the whole story.
If someone proposes a "too good to be true" land deal in Arkansas, skepticism 
might keep me out of court a few years down the road.  Doom and gloom, on 
the other hand, would have me so fearful of a downturn in the economy that I
would pass up good investment opportunities, which in turn has a downward 
effect on the economy which causes me to stop spending, which ....

Anyway, that's just my take on it.  Your mileage may vary.

				SQ

    
    Reminds me of the blind men and the elephant. Points of view, indeed.
    
    I think a flat tax is way overdue. Yes, some people will win and some
    people will lose. If it makes our federal government smaller and more
    manageable, it is good. 
    
    If it creates more savings, increases demand for more goods and
    services, and makes the consumers life a lot more relaxed in the month
    of April, that's goodness too.
    
    But it won't change my life a whole lot in any case (with the exception
    of paying my accountant's tax preparation bills). I think Steve Forbes
    is on to something, just like Newt was last year. But where it goes,
    who knows?
    
    Anything is better than the current mess...
    
    
    		the Greyhawk

>As far as the flat tax,  so far I haven't figured out how the Forbes
>plan could possibly raise taxes on the middle class as some of the anti-Forbes
>ads say.  The numbers just don't add up.  However,  if you cut the taxes

Well, if you lived in California and owned a home purchased in the last five 
or so years and contributed a lot to charity and had huge medical bills and 
pick-and-insert-your-favorite-deductions-here, the numbers would add up.  Our 
taxes would go up slightly, but since we both work, some could argue that we 
don't fall into the middle class anymore.  The good news is we're rich; the 
bad news is we're rich.  The reality is we're slaves to a huge mortgage and 
pay California taxes and have a kid in college.  While we're not starving, we 
live in a tract home and own an old car -- BOY do we feel rich :-)

				SQ

PS.  Even though our taxes would go up, the flat tax is still probably the 
right thing.

    
    It makes me hopping mad that we, the tax payers, are treated like we
    are stupid by Congress - that we would  think that SS is a retirement
    assistance and NOT a %$^& tax. I think once it is called and recog. as
    a TAX, then meaningful dialogue as to what to do with it could start.
    
    I for one do not expect a single penny from SS when I retire. All that
    money is gone already supporting today's folks who really believe that
    they are entitled. I also do not prescribe to the notion that we now also
    has to set up an entitlement system to support the future generations.
    
    Financial independence is every one's INDIVIDUAL responsibility. 
    Now the govt. can be useful if it generates programs to incent/mandate 
    retirement savings, as some of you had mentioned. At the very minimum, 
    it should restore the IRA as when it first came out.
    
    SAvings should be a lifelong practice starting from very young. I
    remember using a piggy bank when I was 3! Then graduated to a simple
    savings account in a bank.
    
    
    Living within our means should be another life-long practice, which I
    found practically "unpatriotic" in the States. 
    
    So fixing THE problems must be taken not only from a complex
    governmental perspective but also from small grassroot changes.
    
    I'd prefer that whatever Flat Tax gets cooked up, it should include
    SS tax. Alternatively if it doesn't then I want to SS tax rate be
    dropped, in a graduated manner, say for 10 years, so that some folks
    do not suffer from cold-turkey welfare withdrawal. At the same time, 
    existing pay-outs, including Medicaid, should be reduced. In other 
    words I do want the govt. to steal from Peter to pay Paul, as it is now.
    
    Really, as a society, we gotta stop this addiction some time. Taking
    personal responsibility over one's financial and bodily health is a
    a duty, not a priviledge.

    MY .02 ...
    
    I'd much rather see a consumption tax. That way everyone pays: even
    criminals buy stuff although they don't file 1040's or 1099's etc.
    I was in Europe a few months ago: coffee in a restaurant was $4 !
    However I got charged for it and that was income to the country.
    It was money that the locals didn't have to pay. I help them out.
    Think of the money we'd make near Disney World alone. 
    
    No filing ... no IRS required to track anything. Pay as you go.
    They want to encourage savings :  this would do it 
    

>   No filing ... no IRS required to track anything. Pay as you go.
>   They want to encourage savings :  this would do it 
        
    The argument against a consumption tax is that it will give rise to
    black markets: unreported sales. The fact that we currently have
    unreported \income/ does not deter the opponents of sales taxes,
    who believe the lost revenue would be an order of magnitude larger.
    
    As usual, this discussion would benefit from an an injection of facts,
    if anybody has any. Failing that, some unbiased statistics would help.
    
      John

    
    	Unfortunately, Bob, a consumption tax is *not* fair to our
    politicians, who rely on campaign contributions from the weathly and
    big corporations to create tax loopholes. No loopholes, no money.
    
    	Altogether just too good an idea to ever get implemented...
    
    		the Greyhawk

    
    RE .86 
    
>    It makes me hopping mad that we, the tax payers, are treated like we
>    are stupid by Congress - 
    
    This is because we are stupid (or ignorant if you like..). A recent 
    survey, released over the weekend showed (give or take a little):
    
    	.40% of Americans can not name the Vice President
    	.33% do not know what politcal party the Vice President is in.
    	.66% can not name their Representative in the House
    	.50% do not know what party their Representative is in
    	.50% believe we spend more on foriegn aid than we do on Medicare
    		(I believe we spend over 20 times more on Medicare)
    
    					Ed
    
    

>    	.40% of Americans can not name the Vice President
>    	.33% do not know what politcal party the Vice President is in.
>    	.66% can not name their Representative in the House
>    	.50% do not know what party their Representative is in
>    	.50% believe we spend more on foriegn aid than we do on Medicare
    
    And 75% of Americans think there's no difference between .40% and 40%
    
      John :-)

    
    Here's a good number:
    
    70% are in favor of the flat tax concept 
    85% think the rich should pay a higher percentage than the poor
    
    Hmmm
    
    Bart
    

>>    Here's a good number:
>>    
>>    70% are in favor of the flat tax concept 
>>    85% think the rich should pay a higher percentage than the poor
>>    
>>    Hmmm

Actually, both of these are accomodated nominally with a flat tax rate on
income above a certain amount.  Those with higher incomes would pay a larger
absolute percentage of their incomes.  (This would not satisfy either those who
want a flat absolute tax rate or those who want a higher marginal tax rate for
higher incomes, but I'd wager most people in these surveys aren't really aware
of the distinctions; anyway, can't satisfy everybody.)

						Brian

    re: .92
    
    Can you say OXYMORON? Like .93 pointed out, these people probably don't
    know what they are talking about. 

    I'm among the both the 70% and the 85%.  I like the flat tax concept
    and I think the rich should pay a higher percentage than the poor.  The
    poor should pay no taxes.  The flat tax accomplishes this by setting a
    high standard deduction.  People making less (the poor) than this pay
    no taxes.  
    
    People making more than this pay an ever increasing percentage of their
    total income as taxes.  This percentage approaches the flat tax rate
    asymtotically.  
    
    Assume a standard deduction of 25,000 and a tax rate of 20% on the
    amount over that.  
    
                earnings    tax     tax 
                            paid    rate
                10,000          0       0%
                20,000          0       0%
                30,000      1,000     3.3%
                40,000      3,000     7.5%
                50,000      5,000    10  %
                60,000      7,000    11.7%
                80,000     11,000    13.8%
               100,000     15,000    15  %
               200,000     35,000    17.5%
               500,000     95,000    19  %
             1,000,000    195,000    19.5%
    
    The overall tax rate of a person making $100,000 is one and a half
    times that of someone making $50,000 and almost five times that of
    someone making $30,000.  A person making $1,000,000 finds that their
    overall tax rate is one and one third that of someone making $100,000.
    It bothers me not at all that there is little increase in the overal
    tax rate once someone makes $1,000,000. 
    
                                        August G. Reinig

    no, you're in the .40% of people that use and understand "asymptote".
    
    Can't you see a politician explaining this?  :-)
    
    Mark

    One graph should suffice.  I've seen it and it looks very simple
    
    
           tax rate   |                --------
                      |           ----
                      |          /
                      |         /
                      |        /
                      |       /
                      --------------------------
                        income
    
    Steve Forbes is going to get killed if he doesn't change is tax plan so
    that people (rather than coorporations) pay the tax on dividends.  He's
    right to want to eliminate double taxation of coorporate profits, he
    just choose to eliminate it in the wrong place.
    
    Why do we tax cooporations anyway?  They just pass the cost on to us
    consumers.  Is this just a backhanded way to implement a sales tax?  If
    we are worried about losing jobs in this country, should we not reduce
    the cost of goods made in this country?  
    
                                                August

> It makes me hopping mad that we, the tax payers, are treated like we
> are stupid by Congress - that we would  think that SS is a retirement
> assistance and NOT a %$^& tax. I think once it is called and recog. as
> a TAX, then meaningful dialogue as to what to do with it could start.

	??  Who is telling you it is not a tax?  It clearly says "ss tax"
	on my paystub, and the IRS Pubs. refer to it as a tax.

> I was in Europe a few months ago: coffee in a restaurant was $4 !
> However I got charged for it and that was income to the country.
> It was money that the locals didn't have to pay. I help them out.

	not to mention something else I love about Europe, that the
	prices usually include not only the VAT but also the service
	(ie. no tipping).

> No filing ... no IRS required to track anything. Pay as you go.

	looks like someone doesn't quite understand how the VAT would work :-)
	there is still tracking that needs to be done from a description
	I read.  Since the VAT is added every step of the way, to avoid
	double taxation the middle steps deduct or are credited for the
	VAT they've paid on the raw materials they've bought to make their
	product.

> They want to encourage savings :  this would do it 

	Be careful we don't *over* encourage savings however (or whose
	going to buy the products keeping the companies in business,
	never mind generate revenue [via the VAT] if no one is buying...

> The argument against a consumption tax is that it will give rise to
> black markets: unreported sales.

	which I believe is the reason why the VAT is charged at every
	step, and then credited to the company when their finished
	product is sold (or re-sold in the case or a re-seller).

	not that it solves the problem, but it helps to not open the door
	too much more than it already is.

    RE .91, - John,
    
    The purpose of the "." at the start of each line in my .90
    was to act as a "bullet" to note each item in a list. I never
    imagined that someone might interpret them as a decimal point.
    
    Re .97 - August,
    
    The reason for having corperation pay the tax is simplification.
    It's easier for a single corperation to pay the tax than for all
    of it's stockholders.
    
    As I did my taxes over the weekend I realized that about
    .00001% (Note this dot is a decimal point) of the work is determining
    the tax. Going to a single rate would not make anything easier.
    Much of the work was figuring capital gains, and based upon questions
    in DIGITAL_INVESTING, many other people have the same problem.
    
    It's interesting that candidates like Alexander(sp?) are saying they
    want you to fill in your taxes on a postcard. But as long as they want
    to keep taxing dividend, interest and capital gains, there's gonna
    be a schedule B and D....and therefore not a lot of simplification.
    
    					Ed
    
    
    
    
Note 967.97                        Flat tax ?                          97 of 100
2099::REINIG "This too shall change"                 23 lines   6-FEB-1996 18:49
--------------------------------------------------------------------------------
    One graph should suffice.  I've seen it and it looks very simple
    
    
           tax rate   |                --------
                      |           ----
                      |          /
                      |         /
                      |        /
                      |       /
                      --------------------------
                        income
    
    Steve Forbes is going to get killed if he doesn't change is tax plan so
    that people (rather than coorporations) pay the tax on dividends.  He's
    right to want to eliminate double taxation of coorporate profits, he
    just choose to eliminate it in the wrong place.
    
    Why do we tax cooporations anyway?  They just pass the cost on to us
    consumers.  Is this just a backhanded way to implement a sales tax?  If
    we are worried about losing jobs in this country, should we not reduce
    the cost of goods made in this country?  
    
                                                August

> The purpose of the "." at the start of each line in my .90
> was to act as a "bullet" to note each item in a list. I never
> imagined that someone might interpret them as a decimal point.

	I can't speak for John, but John did use a :-) which is a
	good sign that he was joshing with ya.  Luckily we all
	knew what you meant, even though it certainly appeared
	as decimal points (usually there is whitespace between
	a bullet and the bullet item itself).

	This reminds me of some grocers in what I consider the old
	days for me, who use to often do things like ".99 cents"
	when they really meant "99 cents" of "$.99".  They never
	honored the .99 cents price however :-(

> As I did my taxes over the weekend I realized that about
> .00001% (Note this dot is a decimal point) of the work is determining
> the tax. Going to a single rate would not make anything easier.

	I indicated this in some earlier replies in my argument that
	the major benifit of a "flat tax" is not that it's a single
	tax rate (as I said we could do that today and Reagan had
	already moved toward that direction in reducing the number of
	brackets in his tax reform in the 80's), but the simplification
	of the tax code itself.  Taking *any* of the current crop of
	flat tax proposals and replacing the single tax rate with
	graduated tax brackets like today would not detract from the
	reform package (except for those in the higher brackets :-)

> It's interesting that candidates like Alexander(sp?) are saying they
> want you to fill in your taxes on a postcard. But as long as they want
> to keep taxing dividend, interest and capital gains, there's gonna
> be a schedule B and D....and therefore not a lot of simplification.
                               ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

	Me thinks there is some confusion here.  The most important
	simplification is to the current tax code, which is literally
	volumes thick.  How many forms/schedules an individual needs
	to fill out is secondary and Sch. B & D (especially B) are
	some of the simplist forms today (IMHO) to fill out.  Forms
	like the 1040 itself, form 1116 (foreign tax credit), 4682
	(begin depretiating capital assets), Sch. E (profit/loss from
	rental property and/or royalties) is the hardest part of
	doing my taxes.

	And don't forget that one of the major reasons for the
	simplification (of the tax code itself) is to remove the
	power from our politications which is easily influenced by
	lobbiest, etc....

> I think a flat tax is way overdue.

	Interestingly Jerry Brown ran on the "flat tax" 4 years
	ago and then everyone seemed to think he was a nut.  Just 4 years
	later, and a change in the political party of the canidate(s)
	running on the idea, and now the idea is all the rage :-)

	BTW, I think I've heard that a so-called "flat tax" had been
	proposed even earlier than Brown, but my memory isn't being
	cooperative.  Anyone know?

    Ed,
    
        While I understand the problem people have with figuring their
    capital gains, I don't understand the problem people have with figuring
    their dividends.  The company sends you a check, you add the amount to
    your income.  It's no different than the way you treat the check you
    get from Digital. 
    
        Capital gains are complicated because one has to remember the how
    much one paid for the item in the beginning.  
    
                                                August

	BTW, I assume *none* of the so-call "flat tax" proposals have
	a provision to get rid of "with-holding"?  That's one of my
	real pet-peeves, the government actually getting an interest
	free loan of my money before the taxes are actually "due".
	And if you don't allow them to borrow the money interest free,
	then they fine you (essentially charging you interest as if you
	had been the one borrowing money vs. vice versa) come the time
	they are officially "due".

	Of course right now the system is so dependent on that revenue
	stream coming in year round vs. lump sums during tax season,
	but since the idea here is major tax reform ....

	And yes, I understand one of the reasons for withholding is
	that some taxpayers will not properly budget for the year
	end "tax bill" (or have the money invested in a bad investment
	gone way south :-), but surely we can work this problem out ...

    re .106
    
    Personally, I liked the way the a self-employed friend of mine
    did his taxes.  He filed quarterly, and made 4 payments a year,
    based on how much he made in the quarter before.  There is a lot
    that you can do with money in 90 days...  Heck, my portfolio
    is up 4% YTD ... Uncle sam would get his, and I would get mine.
    
    Bart
    

re .106, .107

Unless things have changed in the last few years, Digital withdraws monies from 
your check on a weekly basis to cover YOUR (although you may not realize it is 
your) estimate of what your taxes will be.  Digital holds on for that money and 
sends it in to the government on a quarterly basis.  

You certainly can change your witholding rate so that a very minimum is taken
out of your check every week; you need not be self-employed.  You then need
only send in regular, quarterly estimated tax payments to the IRS that will
cause your total tax paid at the end of the year to be the same as the previous
year (to avoid penalties). There are other variations of the theme, but that is
the essence. 

So, the operative question is, "Can you put away money each week so that you
can send a $,$$$.$$ check to Uncle Sugar every three months?" Believe me, 
writing those checks IS painful.  But I do enjoy the additional interest earned 
from having that money in MY account.

Dave

    re -1  A corporation of this size is required to deposit the money
    weekly.  A small company can deposit monthly.  Individuals can deposit
    quarterly.

RE: .108

>You certainly can change your witholding rate so that a very minimum is taken
>out of your check every week; you need not be self-employed.  You then need
>only send in regular, quarterly estimated tax payments ...

My understanding is that the law/regulations prohibit you from reducing
FIT withholding on you paycheck below the amount that will cover the 
[resonably expeted] taxes on that income.

(Pleasd DON'T ask me top define how the "reasonabl expectation" is defined.

>                     <<< Note 967.109 by NAVY5::HENNEGAN >>>
>                               -< Tax Deposits >-
>
>    re -1  A corporation of this size is required to deposit the money
>    weekly.  A small company can deposit monthly.  Individuals can deposit
>    quarterly.
Could not argue, it has been more than a few years since I had to know, for 
sure.  Actually, that makes a stronger case to use minimum withdrawals and 
maximum Estimated Tax payments; far worse for the IRS to have my money each 
week than Digital.

><<< Note 967.110 by STAR::HAMMOND "Charlie Hammond -- ZKO3-04/S23 -- dtn 381-2684" >>>

>(Pleasd DON'T ask me top define how the "reasonabl expectation" is defined.

Using the worksheet attached to the Wx form, you can work out what the maximum 
allowable additional deductions are for your salary range.  When I do that, I 
find my take home pay goes up quite a bit.  Of course, I put the difference 
away until I need to send in the quarterly payments.

Dave

> You certainly can change your witholding rate so that a very minimum is taken
> out of your check every week; you need not be self-employed.  You then need
> only send in regular, quarterly estimated tax payments to the IRS that will
> cause your total tax paid at the end of the year to be the same as the prev.
> year (to avoid penalties). There are other variations of the theme, but that
> is the essence. 

	As others have hinted/believed, the law only allows you to claim
	as many allowances on your W-4 as you are legally entitled to.
	Publication 505 ("Tax Witholding and Estimated Tax") even lists
	that there is a penalty of $500, plus a possible criminal charge
	with a fine of up to another $1,000 or prison for 1 year, or both
	(see page 13).

	For a single person with a single job the most allowances one
	can put down is 1 for yourself, 1 for the special allowance,
	plus whatever is worked out to account for legally anticipated
	tax deductiosn and credits.

	Claiming additional allowances and then filing quarterly to
	to make up the difference (to pocket interest earned in between)
	is likely to raise a flag at the IRS.

	Also FWIW, the penalty you mention for underpayment of estimated
	taxes applies if the amount withheld was *less* (by more than
	10% I believe) than your tax liability (not amount witheld) for
	the previous tax year.  But even if it was (enough est. tax was
	paid), you can still owe a fine if quarterly payments weren't made
	at the proper times (doing a lump sum in the last Q doesn't cut
	it in their eyes).

	That means anyone who realized nice profits in the market last year
	should make sure to either file a W-4 to have more tax witheld,
	or file quarterly for the Q's you realize profits this year.  I
	unfortunuetly ended up with a net loss on my Sch. D *and* my
	Sch. E for 1995  and don't have that worry :-(

Here's some details on one of the other canidates "simplified tax system".
It's Morry Taylor's plan, from some of his own literature:

	"Taxpayers will pay 2% tax on all income under $20,000.
	They will pay 10% on income between $20,000 and $35,000.
	They will pay 17% tax on income over $35,000.
	That's it.  No deductions, no exemptions, no standard
	deduction, no tax credits.

	So if you make $20,000 a year, you'll pay $400 in taxes.  If
	you make $1Million a year, you'll pay $170,000 in taxes a year.

	It's simple -- no need for tax accountants or the IRS.  It's
	fair -- if you make more, you pay more.  It's reasonable --
	it provides enough money to keep government running.  And it's
	right -- everyone pays something into the system, so that no one
	gets a free ride.  Morry Taylor strongly believes that everyone
	ought to pay something -- it's the only way they'll understand
	they have a stake in our society and our government."

No details on what is considered income under this plan (I'd have to
assume dividends/interest income is counted at least, and probably
cap. gains since it says no exemptions).

One nice thing about this canidate is that they actually distribute
much more detailed literature that contains where he stands on most/all
the major issues, in writing! (not just sounds bites talored to the
crowd being addressed).  I wish all the canidates did this!  That doesn't
mean I agree with his positions, but at least he's being honest.

    When I saw his TV commercial, I couldn't help saying 
    "Who the heck IS this guy?"  I like his plan, i think
    just about everyone would, but I don't think he
    has much of a chance...
    
    
    Bart
    

    
    Right, Jeff.
    
    	Morry Taylor's plan *raises* my taxes almost 50%; and I'm
    definetely middle class. But people who make $200K+ will see a real
    nice tax break.
    
    	At least the Forbes plan takes into account base family cash needs.
    
    	Morry is not a rocket scientist, which the folks understand (his
    numbers prove that). Would you prefer to make less than $35,000 in
    this life?
    
    
    		the Greyhawk

re: .114

>	"Taxpayers will pay 2% tax on all income under $20,000.
>	They will pay 10% on income between $20,000 and $35,000.
>	They will pay 17% tax on income over $35,000.
>	That's it.  No deductions, no exemptions, no standard
>	deduction, no tax credits.
...
>       ...It's reasonable -- it provides enough money to keep 
>       ...government running...

Running at what level of spending?  Certainly not the current level!
Without SPENDING CUTS all of the so-called "flat tax" proposals will
increase both the deficite and the debt.

You can't fix a leak in your home's roof by working on you car.
You can't fix a spending problem by changing taxes.

    RE: several back, concerning the history of the "flat tax"
    
    the 1st flat tax was the 1st US income tax, i believe.  1% on income
    over $50k (back in the 1st quarter of this century).

> Right, Jeff.

	Hey, don't say "right" to me, I was just posting the details of
	his plan (which is why it's all in "'s).  At least it's easy
	to get details of his plan.  Forbes plan only gives vauge
	details, and I still don't have enough info to compute my
	taxes under Forbes plan (and I indicated, I have rental income).

> At least the Forbes plan takes into account base family cash needs.

	The Forbes plan was written to please everybody to get you to
	vote for him.  However the Forbes plan completely ignores how
	his plan would be paid for (ie. how to make up the loss revenue
	when you've given almost everyone a tax cut).  Forbes campaign
	office acknowleges their canidates plan requires major spending
	cuts (much more than even the original Republican budget plan),
	but only says details of what will be cut (other than mentioning
	the obvious, the IRS) will be worked out in negotiations when
	he takes office.  I don't know if you've been watching the news,
	but several organizations have *all* confirmed that most everyone
	will pay less taxes with Forbes so called plan, but have also all
	confirmed his plan creates a budget deficit (and this is where they
	vary) from something like $150 Billion to $300 Billon.

	If I had the money (and name recognition) that Forbes has I bet
	you I could beat Forbes in the polls by running on a plan very
	similiar to his, but say in my plan the tax rate would be only
	10%, compared to the outragously high 17% under Forbes plan.
	Seeing both of us are not saying anything about where we make
	spending cuts to pay for our plans, and the public doesn't
	understand or care about deficits anyways, which plan would
	you want?  Someone mentioned "greed" in regards to SS recipients;
	well this is also "greed" causing voters to buy into this plan
	by only looking at the sugar coating/book cover, and not bothering
	to to worry about anything else.

	If the same spending cuts that would be required under Forbes plan
	were made today, without changing the tax system itself, our taxes
	would also go significatly down.

>>       ...It's reasonable -- it provides enough money to keep 
>>       ...government running...
> Running at what level of spending?  Certainly not the current level!
> Without SPENDING CUTS all of the so-called "flat tax" proposals will
> increase both the deficite and the debt.

	I only entered the info about his tax plan.  Taylor, like
	the current Newt-Republicans, is big on cutting whole government
	programs, and he gives the specifics in his package (call
	1-800-376-2228 or 603-624-9696 to get it mailed to you).

	Here's some info on what he says he would cut (from his literature,
	remember I'm only the messenger, I'm not saying I support these
	ideas):

		1/3 of the bureaucrats.  he says our govt has nearly
		3 million federal bureaucrats costing us $200billion
		a year in salaries and benefits alone.  he said he cuts
		from the top.  he said he won't lay off the mailman, but
		the 8 to 9 layers of management (sounds like the old IBM :-)
		above him that you cut from.

		govt should no longer be able to borrow from SS fund.
		providing complete SS and Medicare to individuals who
		make more than $100k/year is excessive.

		cut funding (completely) for PBS and the NEA (the arts)

		no govt money for matching campaign funds

		strictly limiting welfare payments and making work a
		requirement for any support from the fed. govt.

		make English our official language.

		mothball the EPA and dismantle OSHA

>	Here's some info on what he says he would cut (from his literature,
>	remember I'm only the messenger, I'm not saying I support these
>	ideas):
    
    Just to clarify, I believe by "he" you mean Taylor, not Newt.
    
    And that you, Jeff, for noting this is a economic/financial discussion,
    not a "Bill, good -- Newt bad!" (or vice-versa) political evaluation of
    whether these plans are "right" or not.
    
    I don't think Taylor's plan addresses the growth of entitlements, which
    is going to make budget balancing verrrry difficult in the next century.
    
      John

    RE: .116
    
    Don't you think it is irrelevant if it raises *your* taxes or not?
    I mean if *everybody* thought that way, we can never have any tax
    reform.
    
    :-)
    - Vikas

>>	Here's some info on what he says he would cut (from his literature,
>>	remember I'm only the messenger, I'm not saying I support these
>>	ideas):
>     Just to clarify, I believe by "he" you mean Taylor, not Newt.

	I re-read it and it looks clear to me, but then again, I wrote it :-)
	Yes, Taylor.  Newty hasn't sent me any literature yet :-(
	Forbes keeps sending me mail, but mostly of the attack variety
	(against Dole/Grahm/Alexander mostly like the one that came in
	the mail today) and very little details on his tax plan, never
	mind on any other political viewpoints.

> I don't think Taylor's plan addresses the growth of entitlements, which
> is going to make budget balancing verrrry difficult in the next century.

	Well cutting 1/3 of the fed. workers, especially the higher paid
	management types from the top, will certainly reduce federal
	pensions being paid :-)  Plus he made [very] brief mention of
	how he felt about SS/Medicare for those with $100k+ incomes,
	but makes no mention of what he would do about it.

	BTW, he claims that I believe just by cutting the 1/3rd of the
	fed. employees (from the top) alone will balance the budget
	in 18 months.  I'm not sure I understand the math behind that
	one any more than Forbes math :-)

I did a fix pass at my taxes a few nights ago.

based on our taxable income (ie: money put in 401k  not included),
we're paying about 17% to the fed gov't.  does not include SS tax,
Medicare tax.

more details later once i figure them out for real (i just
did an eye-ball estimate to see if i owed dearly).

    How would this be taken:
    
    Have income from 
    $0 - $20,000 be tax-free
    $20,000 - $100,000 be taxed at 17%
    $100,000 to $250,000 be taxed at 20% 
    and all income after be taxed at 17%
    
    The 20% rise (I didn't do ANY math, so my numbers are
    way off) would take away this "  lim           "
    				    taxrate -> .17
    nonsense, and make it truly 17%...
    
    
    Bart
    

    About as well as a recent attempt to gradually phase out certain
    deductions.  It is too easy to demagogue as the rich paying less in
    taxes than the middle class.  (Why is their rate 17% when someone
    making less than them pays 20%.)
    
    Why bother.  It adds complexity for no benefit that I see.
    
                                        august

    Since we are playing the ideas game. Why not eliminate the income tax
    entirely, and substitute a pure consumption tax based on a VAT that
    comes in two pieces - one Federal; one, State the purchase is made in.
    
    And it will keep the bureaucrats employed, and the lobbyists busy
    looking (and paying for) loopholes.
    
    
    		the Greyhawk

    How about switching State and Federal taxes?
    
    (ie send 5.95% to Uncle Sam and 17% to Mr. Weld...)
    
    Think what that might do to Muni Bonds...
    
    Bart
    

.127> Why bother.  It adds complexity for no benefit that I see.

	If you were replying to .126 (it wasn't clear)...
	Making us sign and date the return adds complexity too,
	and so does the fact that postage is not pre-paid ...
	(can you tell that I believe the "complexity" excuse is
	a red herring :-).  And the benefit of graduated rates
	is obvious ...

	From what I've heard from I believe a reporter who follows
	this stuff (I believe it was the guy who was on the Late
	Late Show with Tom Snyder earlier this week) that contrary
	to the urban myth that the rich avoid paying taxes, in
	reality the graduated tax does work.  I believe it's
	big corporations instead that are the ones that the myth
	applies to.

	In any case, whether it's a simplified tax system with a flat
	tax rate or a graduated one, my question is why does Forbes
	plan have to excempt interest/dividends/capital gains?  Forbes
	claims it's double taxation, which I don't see has any merit
	in regards to capital gains.  It has some merit in regards to
	interest/dividends as he claims both the payer of the dividends
	and the recipient both pay taxes on that money.  But isn't
	the nature of even Forbes system?  Ex. I pay taxes on my wages,
	and I use some of my wages to pay someone to landscape my yard.
	The landscaper then has to pay taxes on the money I gave him/her,
	even though I already paid taxes on it too.

    I don't see where taxing interest or capital gains is double taxation
    and I believe Forbes is wrong to exclude taxing these sources of
    income.  I don't see why I should be taxes for investing my labor but
    not for investing my capital.  As I stated before, I would let one
    defer paying tax on all income if one invested it.
    
    I do agree with Forbes that dividends should be taxed only once. 
    In my view, when cooporations make money its the owners of the
    coorporations who are making the money.  Why should the owners have to
    pay tax on this income collectively (as in the coorporation) and then
    individually (when they received their share of the income).  
    
    I see some parallel to child support.  Taxing child support would be
    double taxation.  The payer has already been taxed on their income and
    they are just distributing the income to the people who have a claim on
    the income.  
    
    My comment on the added complexity with no benefit referred to the
    multi-tiered rater structure, 0%, then 17%, then 20%, then 17% again.
    I don't find it appealing.  I believe that it would fairly quickly turn
    into a 0%, 17%, 20% structure.  Then we would add a 25% bracket and the
    deductions would start coming back in, and we would end up where were
    are now. 
    
                                                August

>    I do agree with Forbes that dividends should be taxed only once. 
>    In my view, when cooporations make money its the owners of the
>    coorporations who are making the money.  Why should the owners have to
>    pay tax on this income collectively (as in the coorporation) and then
>    individually (when they received their share of the income).  
>    
>    I see some parallel to child support.  Taxing child support would be
>    double taxation.  The payer has already been taxed on their income and
>    they are just distributing the income to the people who have a claim on
>    the income.  
    
    I see some parallel to paying someone to remodel my bathroom.  Taxing 
    payments to such a person would be double taxation.  I have already
    been taxed on my income and am just distributing that income to the
    person who has a claim on the income (by virtue of having worked for
    it).  :-)
    
    In reality, the reason for taxing dividends is that corporations are
    considered entities for tax purposes, and income tax is payable on any
    income realised by an entity.  If you consider a corporation to be
    equivalent to its shareholders (which is an essential part of the
    "double taxation" argument), then you're denying that the corporation
    is an entity in its own right for tax purposes, and so it should never
    pay any taxes.  Which is how it was when the US tax system started, I
    believe.
    
    John

    And since taxes on corporations only serve to increase the price of
    products, making our goods more expensive both here and abroad I would
    have no problem no taxing corporations at all.
    
                                    August

    Arguments against taxation of capital gains:
    
    1. Inflation erodes the value of capital gains over time. If I bought
       someting at 33 in 1967 and sell it for 100 in 1995, I'll be taxed
       on my "profit" of 67, which is entirely accounted for by inflation.
       (The CPI having tripled since 1967).
    
       There IS merit in trying to account for inflation but this seems to
       be an inexact approach. But the alternative involves a great deal of
       record-keeping, especially with quarterly dividend reinvestments,
       but I bet an enterprising mutual fund family could provide help here.
    
    2. No tax on capital gains would encourage risk-taking in those highly
       dangerous start-ups. By reducing tax liability you make capital more
       readily available to the Pixars and Netscapes, ultimately even to
       the less well known startups. Even that Burger King on the corner.
       If capital gains were taxed then investors would be less likely to
       take a flyer on something new, which means entepreneurs would have a
       harder time raising money, which means fewer new small companies and 
       consequently a stagnating economy.
    
       This ignores the fact that if gains are not taxed, neither are
       losses, so some investors would be less likely to invest their money
       in a venture that is likely to lose money, as most startups do.
       Currently at least their losses are partially subsidized by the
       rest of us.
    
       Also, some people consider it unwise for the government to use tax
       policy for social engineering purposes. That's part of the flat tax
       concept.
    
    Any others?

    Aren't most capital gains made on stock in well established companies?
    
    If I buy Digital at 18 and sell at 75, I've made a big capital gain but
    Digital has received nothing from my investment.  It got its money long
    ago when it sold the share originally.
    
    Inflation erodes the value of interest earned on CD's and bonds.  Why
    treat them differently than capital gains?
    
    Accounting for inflation is not that difficult.  You already have to
    keep track of when you bought the shares and their price then.  The IRS
    would simply have a multiplier table.  Multiply the basis of the shares
    bought in 19xx by dd.dd to get their current basis.  Subtract this from
    their current price to get the gain (loss).
    
    
                                        August

>   Inflation erodes the value of interest earned on CD's and bonds.  Why
>   treat them differently than capital gains?
    
    Because you know the return ahead of time. With stocks you don't know
    if you'll get a return OF your principal, much less a return ON it.
    (I don't find this too convincing, but it's the best I can do off the
    top of my head. And like I said, the "inflation" solution really doesn't 
    match the problem.)
    
>   If I buy Digital at 18 and sell at 75, I've made a big capital gain but
>   Digital has received nothing from my investment.  It got its money long
>   ago when it sold the share originally.
    
    Just link the same argument:
    
    - With NO capital gains tax the initial buyer is willing to pay more
      for an IPO. This reduces the cost of capital for the startup. But the
      IPO buyer plans on selling the stock eventually. He wants a willing
      buyer. With no CG tax the pool of potential next buyers is larger,
      meaning a higher sale price for the IPO buyer. Investors would be more 
      inclined to buy stocks instead of a more predictable bond or similar
      instrument which is taxed at a higher rate. Repeat until you buy at 18.
      (price, not age :-)
    
>    Accounting for inflation is not that difficult.  You already have to
>    keep track of when you bought the shares and their price then.  The IRS
>    would simply have a multiplier table.  Multiply the basis of the shares
>    bought in 19xx by dd.dd to get their current basis.  Subtract this from
>    their current price to get the gain (loss).
    
    In 1983 you bought into a fund that automatically reinvests all
    dividends on a quarterly basis. You sold it in 1995. I claim you
    are gonna have one hell of a hard time filling out the forms with
    the 50 or so purchases that were made on your behalf. Now it may not
    be that difficult for computer-literate people to work through the
    tedium, but Joe Six-Pack hasn't got a prayer...
    
      John

> ... but Joe Six-Pack hasn't got a prayer...

	... but joe six-pack spends all his bucks on beer, butts and cars
	and hasn't any money leftover to invest in a mutual fund anyways :-)

	Well the votes are in, at least in Iowa :-)  Forbes ends up
	in 4th with only 10% of the votes (only 1% more than Grahm).

	Taylor got 1%.  The real surprise, Alexander takes 3rd.

	Low voter turnout however with out 100,000 voters going
	to the poles.  One more week til NH ....

	FWIW, some polls show while many NH voters entertain the idea
	of a flat tax, the main reason likely Forbes voters say they
	will vote for Forbes is not because of his flat tax proposal,
	but because they believe he is an "outsider" (though that's
	debatable given the Forbes family businesses have heavily
	lobbied congress themselves, and Malcom [Steve] Forbes Jr.
	served under Ronald Reagan).

	Speculation is that Ross Perot is likely to enter the race again
	(as an Independent).  Anyone remember what his proposal(s) were for
	reform of the tax system (I don't)?

    When Perot ran in 1992 he never said anything about a flat-tax.
    His only change, as I recall, was to increase the gas-tax by 50
    cents/gallon to help balance the budget.

    Jerry Brown from California was the only candidate in 1992 to
    talk about a flat-tax.  Noone seemed to take him seriously and
    he eventually dropped out.

    The idea is nothing new, there was some writings in the N.Y.Times
    in the early 1980's about a flat-tax, various "liberal democrats"
    back then even felt it was fair to everyone!

    Anyway, I worked out some numbers, and given what Forbes has said
    about his plan I would pay $4000 MORE tax under the Forbes plan
    using my 1995 numbers.

    I also don't understand why people consider Forbes an "outsider".
    With his background and position, I see him as much an insider
    all the other candidates.

I suggest all of you interested in the Flat Tax should read Cecil Adams'
"The Straight Dope" this week in the Boston and Worcester Phoenix.

The question to him was whether the rich really do pay more tax than
everyone else (his answer is a resounding YES), and his answers are
enlightening.  He says that with very few exception, people making a LOT of
money pay a LOT of taxes.  He talks about how the upper x percent of
salarymakers pay for y percent of the total personal income tax, and he
varies x from about 10 down to 1/20th.  His bottom line is, if there was a
20% flat tax, people making $200,000 or more would start paying less tax,
and those of us with more normal salaries would pay more.

Definitely made me think.

adam

	Interesting AP newswire story in todays paper.  The AP took a
	poll of 1,007 adults between Feb. 14-18 (by the ICR Survey Research
	Group of Media, PA).  Sampling error +-3%.

	In answer to the question "Regardless of how you feel about the
	amount of taxes you pay, how do you feel about the federal income
	tax system itself?  Do you think it ....

	    Needs some changes		51%
	    Should be replaced with an
	        entirely new system	28%
	    Works pretty well		17%
	    No answer			 4%".

	Other tidbits from the poll interspersed in the article ...

	63% in the poll says taxes are too high, and these people are more
	likely to favor scrapping the current system than the 32% who rate
	their tax bill as "about right".

	Describing for purposes of this poll a flat tax as "a flat tax that
	would take away all or most deductions, including the home morgage
	interest deduction, to provide one low tax rate for all taxpaers.",
	the response in the poll was 32% support, 50% opposed, and 18%
	not sure.

	National retail sales tax applied to people's purchases rather
	than their income, has 28% support and is seen as less fair than
	either a flat tax or the current tax system.

	The poll finds the public does want to change the way investment
	income is taxed.  55% think it should be taxed less than wages,
	which includes 29% who think it should not be taxed at all.

	Asked who is doing a better job of handling tax issues, 36%
	say President Clinton, and 26% say Republican congressional
	leaders.  Notably, 23% answer "neither," and 15% "don't know"..

	Only 47% say the current system is too complicated, down from
	61% who gave that answer in a 1985 AP poll before the Reagan
	tax simplication plan was approved.  51% say it's simple enough
	for them.

    I was reading an artical on watching insiders who suddenly sell off 
    stock.  Sometimes, it's not a warning.  GAP's CEO looks like a guy who 
    would LOVE a flat tax.  Taxes are due when the restricted stock becomes
    unrestricted.  CEO Millard Drexler, sold 1.3 million restricted shares 
    that had come due.  He needed the $64.6 million to pay taxes and 
    diversify his portfolio.
    
    The CEO owes taxes on $99.5 million this year.  It says he owes about 
    $40 million in federal taxes (plus some more to the state of California).  
    With a federal flat tax of 17%, he would only pay around $16.9 million.  A 
    $23 million savings.
    
    Also, on Time-Warner's Money Magazine WWW pages is a program which will
    figure you taxes under 3 different flat tax plans.  If you remember
    what you paid this year, it gives you your savings.  Also, tells you
    what the treasury department thinks the percent should be under the
    plan to be "revenue neutral" (always higher) and tells you what costs
    companies may pass on to you when your company paid benifits are no
    longer a tax deductable.  Under their plans, I save the most with
    Forbes BUT LOOSE more than 8 times the savings if Digital passes 100% 
    of the lost tax savings on to me.  An eye opener.
    
    I also think the flat-tax is a smoke screen to the real problem,
     
    	- A BALANCED BUDGET -
    
    HTTP://WWW.PATHFINDER.COM - then go down to Money and/or Furtune.

re: -.1     No,  the current system is unfair and too complex
PRECISELY because it has so many exceptions that those with
money can always find ways around paying their fair share. You imply that
a flat tax would help you marginally, but you're basically against
it because it would help the rich "EVEN MORE". You can't have it both
ways (And exclude certain other people from the benefits). It's
flat or its not.  Back to your example, I say so what. He _will_ 
have $23M more to spend on cars, vacations, jewels, restaurants,
DEC computers in every room, perhaps even stocks, like DEC etc.
This can only help companies thrive, create jobs, and help us all.

  Consider: one large Fortune 100 company spent $80M on preparing
it 1994 taxes for it and its subsidiaries.  And you look at only $23M.
Not everyone has a 1.6M share windfall to cash in. BUT everyone
has taxes to prepare.  All the lawyers, IRS folks, tax accountants, 
H&R Blocks, etc are the one who don't want simple taxes.

  The balanced budget debate is ongoing in DC now, and it may or
may not happen. Regardless, the flat tax is long overdue.

re: << Note 967.143 by ESOSRV::BATOR >>>

>...the current system is unfair and too complex
>PRECISELY because it has so many exceptions...

I'm sorry, but you've got CAUSE and EFFECT mixed up.

Peel away another layer or two of the onion and it will become clear to you
that the CAUSE is that taxes are too high and spending even higher.

"Unfainess" and "complexity", real or percieved, are EFFECTs.

> Peel away another layer or two of the onion and it will become clear to you
> that the CAUSE is that taxes are too high and spending even higher.
>
> "Unfainess" and "complexity", real or percieved, are EFFECTs.

    I'm not sure I follow this. If taxes were a flat 50% of income, would
    the EFFECTs "unfair" or "complex" result? How?
    
      John

Re: .143

	You seemed to of jumped in late into this discussion :-)  I suggest
	you skim through the previous 140 or so replies as the claims you
	make have already been discussed.

> re: -.1     No,  the current system is unfair and too complex....

	Unfair to who?
	
> PRECISELY because it has so many exceptions that those with
> money can always find ways around paying their fair share.

	This is urban folklure that the rich today don't pay their fair
	share because they can find ways around it (see previous replies).

> You imply that a flat tax would help you marginally, ....

	I think he said the "proposed 17% flat tax" would, which most
	have finally realized by now (except Arizona which must be full
	of non-wage earning retiries?) is not realistic unless you want
	to do what happened during the Reagan/Bush admistrations; ala
	increase the national debt n-fold because you've dramatically
	decreased revenues *before* you've reduced the spending.  As I
	said during the previous discussions, I could run on the same
	platform as Forbes but make my proposal a "10% flat tax", and
	now who ya gonna vote for? :-)  Now without doing what Reagan did
	and borrowing from the future (don't ya just wish we all could
	do that :-), the flat tax rate would, as almost all economic
	think tanks have reported, have to be anywhere from 20-25%.  That
	would be a tax *increase* for most middle income families/individuals.
	Why?  Because you've shifted the tax base by shifting what is/isn't
	taxed.  The higher than middle-income Americans are in general the
	ones that have a higher percentage of their income from unearned
	sources, vs. middle America's income coming from earned income
	(ala the sweat off of their brow).

> ... but you're basically against it because it would help the rich "EVEN MORE"

	let's put it this way.  if your taxes are staying the same, while
	the rich are getting a generous tax break, you should be worried
	as you'll be paying for it in one of three ways; 1) less services
	due to spending cuts to pay for that tax break for the rich, 2)
	increased budget deficit that bankrupts the country or decreases
	the standard of living somewhere down the road, 2) increased taxes
	on middle America in a few years to make up the "unexpected"
	loss in revenue.

> You can't have it both ways (And exclude certain other people from the
> benefits).  It's flat or its not.

	Again you missed previous discussion.  The so-called "flat tax"
	is not as simple as it sounds, which is obvious by the number of
	different proposed versions there are floating around.  Forbes
	flat tax only taxes earned income and has only a standard "allowance".
	The fact that Forbes version only taxes earned income is the big
	pie in the sky as far as tax savings for the rich go.  However
	several of the other flat-tax proposals continue to tax unearned
	income (dividends/cap. gains/etc).  So indeed you can have it both ways.

	Also as I've mentioned many times, and only relatively recently have
	I seen the print media mention, is that the real guts to the so
	called "flat tax" plans is not that there is a single [ala flat]
	tax rate, but that these plans propose scrapping most of the tax
	code itself.  The fact that our our current tax system also has
	multiple rates (which is also important to note again that the
	multiple rates are graduated, not the effective overall rate that
	applies to *all* your income) is *not* the complex part, it's
	everything else up to arrive at how much "taxable" income you have.
	Once you finally have that it takes 1-5 minutes (depending on your
	eyesight :-) to lookup up the tax in the tax table.  Even the
	discussion in the 1040 instructions on how to manually compute
	your tax liability is very short is staightfoward (this assumes you
	have more taxable income than the tables go up to, which if it is
	the case for you, I'm willing to bet you're smarter than the
	average joe :-).

> Back to your example, I say so what. He _will_ 
> have $23M more to spend on cars, vacations, jewels, restaurants,
> DEC computers in every room, perhaps even stocks, like DEC etc.
> This can only help companies thrive, create jobs, and help us all.

	If you are a strong believer in trickle-down (ala voodoo) economics,
	then hell, why stop there.  Let's abolish the income tax system
	altogether.  Then we'll all have more $ to spend on cars, vacations,
	jewels, .....

> The balanced budget debate is ongoing in DC now, and it may or may not happen

	Given the current crop of house Republicans unwilling to play by the
	rules our founding fathers layed out (ie. the system of checks and
	balances, vs. blackmailing another branch when they don't have
	the votes to override that other branches check (veto), and are
	unwilling to compromise enough with either that other branch, or
	within their own branch for the votes needed to override the veto),
	then I doubt we'll see much happen until the house is cleaned
	once again (and replaced with either more Newt-Republicans to
	get that 2/3rds needed to override, or making the Newties the
	minority again) or Clinton is unseated by Bob Dole or Lamar Alexander
	(if Forbes or Pat B. unseat Clinton then you can really kiss the
	prospect of a balanced budget goodbye :-)

re: 967.145 

>...If taxes were a flat 50% of income, would the EFFECTs "unfair" or 
>"complex" result? How?
    
    A broad concensus of Americans is said to believe that paying about
    25% of income as taxis is fair.  On that basis, yes, if taxes were a
    flat 50% or income would be percieved as unfair.  Unless you have a
    better ruler, I think that perceptions is what defines "fairness".
    
    As for "complex"... I doubt that a true flat 50% with NO exceptions
    would be perceived as "complex".  wrt "complex", my point was that
    people don't really care how "complex" taxes are, so long as the are
    pcercieved to be "fair".

>    wrt "complex", my point was that
>    people don't really care how "complex" taxes are, so long as the are
>    pcercieved to be "fair".

Complexity is an agitator.  The more complex the tax system is, the
more time and attention people spend trying to keep the money that 
they've earned.  The more time they so spend, the more chances there
are to ponder how unfair the current tax system is, how the government
spends this money in wasteful, self-serving, and creative ways, and 
how the system could be improved.

There is also a tangible cost to this complexity.  The number of hours 
spent researching, lobbying, legislating, drawing up forms and tables,
filling out forms, and so on, by the citizens of this country is very
great indeed.  There is a substantial amount of overhead that could be
put to more productive uses!

-Austin

>>    A broad concensus of Americans is said to believe that paying about
>>    25% of income as taxis is fair.  On that basis, yes, if taxes were a
>>    flat 50% or income would be percieved as unfair.  Unless you have a
>>    better ruler, I think that perceptions is what defines "fairness".

I disagree.  I think that, for most Americans, the "fairness" part is the
"flat" part, i.e. everybody pays the same rate.  I think people would consider
a 50% flat tax too high, but not unfair per se.  Unless you interpret "unfair"
to mean "my taxes are too high," which I doubt is the case.  For example, you
could say that only people with last initial H pay taxes, and the vast majority
of people would pay no taxes, but I don't think people would consider that
fair.

>>    wrt "complex", my point was that
>>    people don't really care how "complex" taxes are, so long as the are
>>    pcercieved to be "fair".

I disagree with this, too.  I think many people do care about complexity,
that's why the "tax returns on the back of an envelope" is garnering
significant support, and that's why "tax simplification" was a big deal a
number of years ago.

Sure, people care about how much taxes they are paying, but let's not confuse
the issues with each other.

						Brian

    re: .147
    
   > A broad concensus of Americans is said to believe that paying about
   > 25% of income as taxis is fair.  On that basis, yes, if taxes were a
    
    OK, but where's the gov't gonna put all those Checkers & Peugeots? :-)
    
    
    Seriously, though, please cite your source for this assertion. Since I
    suspect a 25% flat tax would _raise_ the tax bill for 95% of filers,
    and lower it for the top 5%, I have difficulty believing its veracity.
    
    Jon  

re: .150 
    
>    Seriously, though, please cite your source for this assertion. Since I
>    suspect a 25% flat tax would _raise_ the tax bill for 95% of filers,
>    and lower it for the top 5%, I have difficulty believing its veracity.
    
 See my note 967.21 for the reference to the particular study.

	Here's another way to look at the fairness issue: there's the
"relative fairness" goal that ensures that everybody is treated equitably, 
and there's the "absolute fairness" that ensures that nobody gets gouged
in absolute terms.

	The study supporting the 25% number refers to the "absolute
fairness" of taxes.  Should anybody have to pay more than 25% of what
they have earned, regardless of how much they have earned???  That's
what the article focused on.  The finding was an overwhelming number
of respondants said that 25% should be the maximum that anybody should 
pay in taxes -- that includes federal, state, and local taxes.

	Who knows.  Maybe somebody will start a constitutional 
ammendment to make 25% the maximum taxation rate.  Volunteers?

-Austin

	For anyone interested, NBR (the Nightly Business Report, on your
	local PBS station) is supposed to reveal on tonights show the
	results of a poll they did on how businesses feel about flat
	taxes ....

re: Note 967.149

>... I think that, for most Americans, the "fairness" part is the
>"flat" part, i.e. everybody pays the same rate. ...

I think you're wrong.  In my opinion, most Americans think that it is
"fair" for "wealthy", "high income" people to pay a higher tax rate.
Disagreement comes when we try to agree on what constitutes "wealthy"
and "high income", and on how much higher the rate should be.

I have no data; just my opinion.  If anyone DOES have data on this,
maybe you'd share it here?

>> I think you're wrong.  In my opinion, most Americans think that it is
>> "fair" for "wealthy", "high income" people to pay a higher tax rate.
>> Disagreement comes when we try to agree on what constitutes "wealthy"
>> and "high income", and on how much higher the rate should be.

I have trouble reconciling this opinion with your previously stated opinion
that "most Americans consider a 25% flat tax fair."

Be that as it may, the issue I've been trying to address here is your earlier
statement to the effect that "high taxes are the cause, unfairness and
complexity are the effects."  I have not seen any reasonable argument yet to
support this statement.  I interpret this to mean that you believe that high
taxes cause unfairness and complexity; if this is wrong, please tell me.

The discussion indicates a difference of opinion among the noters on the
definition of "fair."  It's awfully difficult to agree whether something is
"fair" without agreeing on what "fair" means.  The definition I would use is
that everybody is treated equivalently.  I leave open whether, regarding tax
rates, "equivalently" would mean a graduated rate or a flat rate, or some other
permutation.  It is only unfair when a portion of the population is subjected
to a tax level that is not in accordance with some "equivalence" measure.

By this definition, with "equivalent" meaning "equal rate," a high but usurious
tax rate is "fair" because all people are treated equivalently.  That doesn't
make it acceptable, but it does meet one reasonable definition of fair.

There has been no apparent disagreement over the definition of "complex," but I
do not see how one could argue that high taxes per se produce complexity.

Finally, I stand by my previous opinion that there are several issues here:

	- Taxation level
	- Tax fairness
	- Tax complexity

They are related, but they are different, and it's important not to confuse
them with each other.

						Brian

    re: .151
    
 > See my [.151's] note 967.21 for the reference to the particular study.
    
    
    The results would have been more meaningful if they had phrased the
    question as follows:
    
    Would you be willing to pay more $ in taxes so that people making over
    $200,000 would pay taxes at a maximum tax rate of 25%?
    
    
    The question they asked merely documented a concensus concerning a
    maximum tax rate. When there's no perceived cost, people will always
    appear generous. Somehow, I suspect the results to the above question
    would be _quite_ different.

re: < Note 967.154 by PERFOM::WIBECAN "Harpoon a tomata" >>>

>>> I think you're wrong.  In my opinion, most Americans think that it is
>>> "fair" for "wealthy", "high income" people to pay a higher tax rate.
>>> Disagreement comes when we try to agree on what constitutes "wealthy"
>>> and "high income", and on how much higher the rate should be.
>
>I have trouble reconciling this opinion with your previously stated opinion
>that "most Americans consider a 25% flat tax fair."

Without re-reading what I wrote, I don't think the pole I refered to said
that "most Americans consider a 25% FLAT tax fair".  It had nothinig to 
do with flang vs graduated taxes.  I had interpreted it to indicate a
graduated tax, with at least some deductions/exclusions, and a maximum
rate or about 25%.

>Be that as it may, the issue I've been trying to address here is your earlier
>statement to the effect that "high taxes are the cause, unfairness and
>complexity are the effects."  I have not seen any reasonable argument yet to
>support this statement.  I interpret this to mean that you believe that high
>taxes cause unfairness and complexity; if this is wrong, please tell me.

There are [at least!] two ways to look at this.

(1) It is not that high taxes "cause" unfairness as a separate action, but
rather that they are preceived as unfair in and of themeselves.

(2) Being perceived as unfair we try to make them more fair, and or to
avoid them, which results in complexity.

>The discussion indicates a difference of opinion among the noters on the
>definition of "fair."  It's awfully difficult to agree whether something is
>"fair" without agreeing on what "fair" means.  The definition I would use is
>that everybody is treated equivalently.  I leave open whether, regarding tax
>rates, "equivalently" would mean a graduated rate or a flat rate, or some other
>permutation.  It is only unfair when a portion of the population is subjected
>to a tax level that is not in accordance with some "equivalence" measure.

I agree that there is disagreement. However, substituting "treated equivalently"
for "treated fairly" does nothign to improove the disagreement.

>By this definition, with "equivalent" meaning "equal rate," a high but usurious
>tax rate is "fair" because all people are treated equivalently.  That doesn't
>make it acceptable, but it does meet one reasonable definition of fair.

In my opinion, too high is one aspect of unfair.  So I reject this definition
of fairness.

>There has been no apparent disagreement over the definition of "complex," but I
>do not see how one could argue that high taxes per se produce complexity.

See the point labled (2) above.

>Finally, I stand by my previous opinion that there are several issues here:
>
>	- Taxation level
>	- Tax fairness
>	- Tax complexity
>
>They are related, but they are different, and it's important not to confuse
>them with each other.

I regard taxation level and tax complexity as aspects of tax fairness.
But, I see your point and agree.

	FWIW, in case some of you didn't know, Steve Forbes hosted Sat.
	Night Live this past Sat.  He did talk about his flat tax proposal
	in the opening monologue and in at least one skit.  I guess you
	could say he gave as much details about his proposal as he did during
	his entire campain :-)

	He didn't do too bad reading the que cards (which was overly obvious,
	but he did no worse than Nancy Kerrigan ....).

    re: .49
    
    > Yes, I get to claim my mortgage interest, but I lose my
    > personal deduction of $3900. Say I paid $6000 in interest, I claim
    > an extra $2100.
    
    Surely you have some deductions other than the mortgage interest.
    State and local taxes, for a start, will give a decent boost to your
    itemized deductions; also any charity contributions, etc. (Say, I
    wonder if donating blood to the Red Cross could be considered a
    "non-cash contribution" on Schedule B. I know that when people are paid
    to donate because they have a rare blood type, the IRS considers the
    blood to be a taxable asset. Does that appear under Capital Gains? :)
    
    The point is (and you can also deduct points :) that you probably can
    deduct most or all of that $6000.
    
    >Yet, it seems you get more benefits from the goverment by having children.
    
    The tax savings end up being a few hundred per head, which is scarcely
    noticeable compared to the cost of maintaining the li'l rascals.
    Believe me, nobody is having kids to save on their taxes!
    				Jim B.

>                                                               Say, I
>    wonder if donating blood to the Red Cross could be considered a
>    "non-cash contribution" on Schedule B.

You mean schedule A, and Publication 17 explicitly mentions that it's
not deductible.

	The guest commentary on NBR tonight (Monday) was Martin Anderson
	(the caption did not list his credentials or co. affliation).
	He contends that if the Republicans took their current "grab
	bag" of tax cuts and scrapped it and instead cut everybodies
	tax rate by the same amount instead (ie. I assume he means
	cutting the same % off each marginal tax rate, thought I'm
	not sure if he meant % points, of plain %) that they could cut
	everbodies tax liability by 7%.  He said this would be a return
	to Regan policy vs. the special interest grab bag like the
	$500/child tax credit.

	Sounds good to me!

    Here are some numbers Kiplinger obtained from the IRS:
    
    	The	have AGI    Income    Taxes
    	top	at least   fraction  fraction
    
    	 1 %	$185,790    14 %       29 %
    	10 %	$ 66,195    39 %       59 %
    	25 %	$ 41,190    62 %       79 %
    	50 %	$ 21,150    95 %       85 %
    
    I believe this is on a per-return basis. Meaning if you take the top 1%
    of filers on an AGI basis, you will find they represent in total 14% of
    all income earned in the country, but they pay 29% of all the income taxes.
    
    This doesn't take into account Social Security taxes or state taxes,
    but it looks to me like even if when those are factored in you'll still
    find the "wealthy" pay proportionally more in taxes than the income 
    they receive. (Suppose the top 1% paid NO SS or sales tax. Broadly
    speaking those two total about 12%, and the top two lines pay more than
    12% in taxes than their share of AGI. That's just a finger-in-the-wind
    approximation; you could probably get better estimates if you worked
    on things a bit more).
    
      John

    this looks odd:
    
    >  	50 %	$ 21,150    95 %       85 %
    
    doesn't this mean that the bottom 50% of filers make up for 5% of the
    total income but pay 15% worth of total taxes?

My guess is that the last line should read
    	50 %	$ 21,150    85 %       95 %

    Dah Ming is right, I screwed up the last line. Make that:
    
    	The	have AGI    Income    Taxes
    	top	at least   fraction  fraction
    
    	 1 %	$185,790    14 %       29 %
    	10 %	$ 66,195    39 %       59 %
    	25 %	$ 41,190    62 %       79 %
    	50 %	$ 21,150    85 %       95 %
    
    Nice to know the readership of this conference is so alert!
    
    Wow. Half of the country (actually, half of the tax returns) account
    for only 5% of the taxes.
    
      John

> Wow. Half of the country (actually, half of the tax returns) account
> for only 5% of the taxes.

	It likely also mirrors the distribution of wealth in this country
	today.  Ie. the wealthyist 1% own x% of the wealth, etc etc.
	If I recall from reading "The Great Depression of 1990" (which
	apparently never happened :-), in the years leading up to the
	great depression earlier this century, the distribution of wealth
	reached such and such a level, and that was on of the things that
	supposedly was being mirrored in the years leading up to 1990.

That makes it
    
    	The	have AGI    Income    Taxes
    	top	at least   fraction  fraction
    
    	 1 %	$185,790    14 %       29 %
    	10 %	$ 66,195    39 %       59 %
    	25 %	$ 41,190    62 %       79 %
    	50 %	$ 21,150    95 %       95 %
    
and
    
                          Adjusted Gross      Income    Taxes
                             Income          fraction  fraction
    the top     1%     $185,790 - 1 Gates       14%      29%
    the next    9%      $66,195 - $185,789      25%      30%
    the next   15%      $41,190 -  $66,194      23%      20%
    the next   25%      $21,150 -  $41,189      33%      16%
    the bottom 50%           $0 -  $21,149       5%       5%
    
We see that the middle 40% earn 55% of the income and pay only 36% of the
taxes.  The bottom 50% earn 5% of the income and pay 5% of the taxes.  It
seems odd that the poorest 50% don't pay even less in taxes.  They would
neither gain nor lose in a completely flat tax system (x% of income, no
deductions).  I can't help but think they would gain in a modified flat tax
system.

                                                August G. Reinig

re: .167

>    the top     1%     $185,790 - 1 Gates       14%      29%

Just to correct a misconception - Bill Gates may *have* a lot of 
money, but he isn't *paid* a lot of money.  Owning 23.9% of 
Microsoft's stock makes him a wealthy man, but his annual 
compensation is only ("only", yeah right) $415,580 including
salary ($275K) and bonus ($140K and change) and stock (none),
according to the most recent proxy statement. 

Of course, each $1 increase in MSFT makes Gates about $140 
million (yes, million) richer.

Wes

    
    Re .161
    
>    This doesn't take into account Social Security taxes 
    
    (I believe the figure is) two out of three households pay more
    in SS taxes than they do in federal income taxes.
    
    As inflation continues to raise both the SS earnings limit and the
    income tax brackets, even more people will be paying more in
    SS tax than federal income tax.
    
    When total taxes are considered, the lower middle-class do not
    have it nearly as good as the federal income tax figures state.
    
    					Ed
    
    

While reading this string of Notes, a though came to my mind...

In nature, the natural law is that the productive ones (eg. the good hunters, 
the physically strong & the smart, etc.) will survive and prosper. The human 
specie, against all odds, had overcame all the obstacles and competitions and 
moved to the top of the food-chain. It is because we were able to be more 
productive, more efficient and smarter than the rest of the animal world. 

Now, I am under the assumption that the people who make more money in our 
society today are *generally* more productive people, and the people who make 
less money are therefore *generally* less productive. But, what we do today is 
to hammer over and over again on those people who are more successful (at least 
as far as income is concerned) with heavy tax burdens. Aren't we going against 
the law of nature? 

Now, before anybody accuse me of being cold hearted, I am NOT advocating to 
have those poor people just die off by themselves. But, we need to find a tax 
system that is *equitable* to ALL of the people live in this society. I like 
the idea of a flat tax. But, a consumption tax is even better. That way, the 
rich consumes more and therefore they will pay more in taxes. But, at least 
they are paying it WILLINGLY. 

Mike

    re: .167
    
    .-? said the last line should be 
    
        	50 %	$ 21,150    85 %       95 %
    not
        	50 %	$ 21,150    95 %       95 %
    
    which should make the last two lines of your table
    
    the next   25%      $21,150 -  $41,189      23%      16%
    the bottom 50%           $0 -  $21,149      15%       5%
    
    Dave

That makes it
    
    	The	have AGI    Income    Taxes
    	top	at least   fraction  fraction
    
    	 1 %	$185,790    14 %       29 %
    	10 %	$ 66,195    39 %       59 %
    	25 %	$ 41,190    62 %       79 %
    	50 %	$ 21,150    85 %       95 %
    
and
    
                          Adjusted Gross      Income    Taxes
                             Income          fraction  fraction
    the top     1%     $185,790 - 1 Jordan      14%      29%
    the next    9%      $66,195 - $185,789      25%      30%
    the next   15%      $41,190 -  $66,194      23%      20%
    the next   25%      $21,150 -  $41,189      23%      16%
    the bottom 50%           $0 -  $21,149      15%       5%
    
Thanks for the corrections.  I've decided to use Michael Jordan as the
representative for the highest Adjusted Gross Income in the country.  He
does get a large salary every year.  (Most of it from endorsements.)  

I find it interesting that the bottom 50% make just slightly more
than the top 1%.

                                    August

Can't resist adding two columns to your table...


							(relative)
                  Adjusted Gross    Income   Taxes   Average Average
                     Income        fraction fraction  Income  tax
top     1%     $185,790 - 1 Jordan    14%     29%	46   290
next    9%      $66,195 - $185,789    25%     30%	 9    33
next   15%      $41,190 -  $66,194    23%     20%	 5    13
next   25%      $21,150 -  $41,189    23%     16%	 3     6
bottom 50%           $0 -  $21,149    15%      5%	 1     1

Note, average over the above brackets at least, the incremental
tax is quite progressive.

Wonder what is the percentile at which point the tax fraction
starts going negative...