FairTax discussion

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FairTax discussion

Postby Dustin07 » Wed Mar 18, 2009 12:43 pm

Go Congressman Steve King!!!

http://www.youtube.com/watch?v=bT6D78uG6-s

its long, but good! :thumbsup: at least give it 4 minutes! that's all it takes to get you hook, line, and sinker.
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Re: FairTax discussion

Postby Dustin07 » Wed Mar 18, 2009 1:45 pm

Up to 51 cosponsors in Congress for massive tax revolution!!
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Re: FairTax discussion

Postby SpinnerMan » Thu Mar 19, 2009 7:30 am

I personnaly am not that concerned with the tax side of the equation. It is the spending side. There is definite benefit in not hiding taxes. However, the concept is so simple that I just don't understand how people do not get it.

The average American will in some way shape or form pay the average amount that the government spends.

Even if it does not show up as a direct tax, it will get paid in some hidden form as higher costs of goods, fees, ... The average American has to pay the average bill. It simply does not add up any other way. Tax corporations and they pass it through as higher cost of goods, lower wage, lower employment, and lower rates of return to the stocks in your pension fund, 401(k), etc. This is a concept that requires no legislation that everybody can understand.

So when Obama says this is going to cost a trillion dollars, that means over $3,000 out of the pocket of the average American, which includes every man, woman, and child. That means if you are the average family of 4, then in some way, shape, or form, you will be transferring $12,000 from your pocket to the government. You probably won't see that $12k come out of your pay check, but it is money that you would have had if it were not for paying more for your car, your groceries, etc. Maybe you would have gotten a higher salary or a bigger pension. It is a zero sum game. Everything that is spent must be paid for and on average the average guy is paying the average amount. It doesn't add up any other way.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 11:04 am

What I like about the FairTax is it almost 100% eliminates any incentive for people to hide their incomes and wealth in America. If you make a billion $ bonus, you don't have to hide it in offshore accounts because the government isn't billing you based upon your income.

Right now the government tries to reward us for debt... interest write-offs, etc. And it penalizes us for savings by taxing our interest earned, capital gains etc. The FairTax would eliminate that.


Some people will save some money, some people will finally pay taxes, but it is government-revenue neutral. The government should collect the same amount of money with the fairtax as it does now. The difference is that the illegal immigrants, drug dealers, and tax evasionists will finally start paying their piece of the pie.

did you know that it is assumed that the lost tax revenues from the the underground economy (under the table type pay, illegals, etc) is about 1/2 of our $800,000,000,000 stimulus EVERY YEAR???

so if our stimulus costs the average household of 4 $12,000 per year, imagine what the illegals, drug dealers, prostitutes, and other tax evanionsists are costing us. They estimate that market is about $2trillion per year.
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Re: FairTax discussion

Postby Indaswamp » Thu Mar 19, 2009 11:11 am

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Re: FairTax discussion

Postby Indaswamp » Thu Mar 19, 2009 11:18 am

Right now the government tries to reward us for debt... interest write-offs, etc. And it penalizes us for savings by taxing our interest earned, capital gains etc. The FairTax would eliminate that.


The reason the gov. does this is tied directly to our money system...money in our country is debt. In 1971 when nixon took us off the gold standard, our money became a currency..an instrument of debt. to increase the money supply, more debt has to be created....no debt= no money. (except the value reflected by the GDP...which is real).
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 11:51 am

Indaswamp wrote:
Right now the government tries to reward us for debt... interest write-offs, etc. And it penalizes us for savings by taxing our interest earned, capital gains etc. The FairTax would eliminate that.


The reason the gov. does this is tied directly to our money system...money in our country is debt. In 1971 when nixon took us off the gold standard, our money became a currency..an instrument of debt. to increase the money supply, more debt has to be created....no debt= no money. (except the value reflected by the GDP...which is real).


And the only way to grow an economy built up on debt is further debt. Do you really believe though that mortgage write offs are an idea drummed up by concerned politicians to help the working man, and not a tool of mortgage Lobbyists? We are setting our fellow American's up for failure.

America's national average savings dropped to a negative number during our artificial boom only a couple years ago. When it finally picked up over the last 6 months, Obama came out and told people 'not to shove money in their mattresses' because if he can force them to spend, he'll look like a saint. WRONG. He needs to encourage people to boost savings and build a solid economy built upon good principals.
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Re: FairTax discussion

Postby Indaswamp » Thu Mar 19, 2009 1:11 pm

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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 1:25 pm

Good post!

I still believe the 2nd most patriotic thing a person can do is interract with their government and openly discuss taxes. The first being military service :thumbsup:
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Re: FairTax discussion

Postby Just Ed » Thu Mar 19, 2009 1:35 pm

This is a very, very bad idea.

The national sales tax rate would be about 30%. I make over $75k per year and my current EFFECTIVE tax rate is only 13%. My profession is to represent a telephone company in front of tax auditors at state and local levels....I'm not talking out of my butt here.

Think about this....you currently pay on average 8% sales tax at the local level on purchases. In the case of regulated telephone service, you are also paying (in most instances) 911 tax to fund the telephone system...Federal Excise Tax....Universal Service Fund....Telephone Relay Service Charge....etc., etc.

The current tax rate for the average telephone user is 70% in Florida....add 30% to that just for phone calls!

Pass this and you will be going to the store...those $20 tennis shoes are going to actually cost you $30....and if you order them online you're going to be paying for shipping on top of that.

This is a bad move.....just ask our friends to the north that have to deal with QST, HST, PST, etc.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 1:49 pm

Just Ed wrote:This is a very, very bad idea.

The national sales tax rate would be about 30%. I make over $75k per year and my current EFFECTIVE tax rate is only 13%. My profession is to represent a telephone company in front of tax auditors at state and local levels....I'm not talking out of my butt here.

Think about this....you currently pay on average 8% sales tax at the local level on purchases. In the case of regulated telephone service, you are also paying (in most instances) 911 tax to fund the telephone system...Federal Excise Tax....Universal Service Fund....Telephone Relay Service Charge....etc., etc.

The current tax rate for the average telephone user is 70% in Florida....add 30% to that just for phone calls!

Pass this and you will be going to the store...those $20 tennis shoes are going to actually cost you $30....and if you order them online you're going to be paying for shipping on top of that.

This is a bad move.....just ask our friends to the north that have to deal with QST, HST, PST, etc.


Ed, your observations are untrue, and are the first complaint that most people offer when objecting to the fairtax. If you research the bill further you'll find the solutions to your concerns.

First off, since you are taking home your ENTIRE paycheck with the fair tax, including social security, med, and of course federal income, you'll be taking hom probably 20%+ more than you do now.

Second, all of those items you are currently purchasing have an estimted 22% embedded tax in them. I run a small business now with my dad. The amount we pay in related taxes equals probably two more peoples incomes. If we got rid of those taxes one of two things would happen, our costs would lower, or we'd hire more people. Take your pic, both are great solutions.

but going back to embedded costs. EVERY product you buy already has embedded tax costs, like I said, they average 22%.

so i you were to buy a $100 coat, $22 is embedded taxes. With the fairtax, manufacturers will be saving massive money and will drop prices to compete with eachother. Before long that $100 coat will be $78 again. However, the FairTax is a 23% INCLUSIVE tax, inclusive, like your current payroll tax. So after the fairtax takes its place, that $100 coat will be $101.29. So YES it will cost $1 more, but remember that the $100 you earned on your paycheck is now saving you $25 in taxes. Because before you were paid $100 and only took home $75 after fed,fica, SS, etc. Those are all gone.




also consider our current social security and medicar woes. Remove those from our payroll taxes and move them to the FairTax and now instead of having 150million legal working people paying for everyone, you have 300 million CONSUMING americans paying for everything fairly, in addition to the illegals who are now contributing to your social security and medicare, and also the tourists (approx 50million/year).




research the fair tax. you've been misguided.
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Re: FairTax discussion

Postby Just Ed » Thu Mar 19, 2009 2:11 pm

I haven't been misguided...I'm experienced. This has been my profession for 18 years.

Your assumptions are terrific....provided everything we buy is produced in the U.S. and provided that individual States do not have the right to create there own tax system. That is not the case here. We buy products from all over the world....whether they are manufactured by kids in Bangladesh or factories in China. Labor (i.e. U.S. wages) is not a huge factor here.

Your comments about the tax you take home on your paycheck is also a bit short sided....the government may withhold that money...but you get it back in the form of a refund on your tax return. Again, I hope you consider your EFFECTIVE tax rate. It doesn't matter if I pay 13% now....or 13% after I get my refund on or about April 15th. Bottom line is, I'm paying 13% in MY effective tax rate. That's a heck of a lot better than paying up to 50% in Federal, State, and Local taxes later when I need food or clothing.

If you want to talk about embedded costs....let me ask you this. In you and your Dad's business....how much time and money is allocated preparing state and local tax returns (for sales and use tax), researching if the stuff you buy and sell is taxable or not, fighting with tax auditors when they want to review your books and records, updating your accounting system to reflect changes that occur on a monthly basis. These are all embedded costs that will not change with a FairTax. They will still be there....in fact, those costs will go up. Keep in mind this will abolish FEDERAL income tax...this has nothing to do with State income tax. Even then, you will still be liable for sales tax, use tax, property tax, business and occupation tax, excise tax, franchise tax, etc., etc.

...and you don't want to get me started on the illegal alien discussion. All I will say is this: If you, as an employer, pay wages, then you are required to withhold tax on your employees - it doesn't matter if they are legal or not. If employers aren't withholding taxes on those wages, then it isn't the "illegal aliens" that are the problem - it's the U.S. employer that is. Once those wages are withheld, then it is up to said "illegal alien" to file for a refund on those withheld wages. The issue becomes an issue of identity theft - not an issue about whether or not someone pays their taxes. Think about that.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 2:49 pm

Just Ed wrote:
Your comments about the tax you take home on your paycheck is also a bit short sided....the government may withhold that money...but you get it back in the form of a refund on your tax return. Again, I hope you consider your EFFECTIVE tax rate. It doesn't matter if I pay 13% now....or 13% after I get my refund on or about April 15th. Bottom line is, I'm paying 13% in MY effective tax rate. That's a heck of a lot better than paying up to 50% in Federal, State, and Local taxes later when I need food or clothing.


That's fine, but you're not likely going to get 100% of your taxes back on April 15th. Especially not SS and Medi. it also doesn't account for the fact that you're paying an embedded tax estimated at 22% already on everything you buy. Government isn't going to help you there.

Please compare apples with apples when making a statement such as "50%" in fed/state/local taxes. Right now when paying a 22% embedded tax + 9% local tax + income taxes, ss/Med, we're already at 50%.

Familiar with AMT? http://en.wikipedia.org/wiki/Alternative_Minimum_Tax

Just Ed wrote:If you want to talk about embedded costs....let me ask you this. In you and your Dad's business....how much time and money is allocated preparing state and local tax returns (for sales and use tax), researching if the stuff you buy and sell is taxable or not, fighting with tax auditors when they want to review your books and records, updating your accounting system to reflect changes that occur on a monthly basis. These are all embedded costs that will not change with a FairTax. They will still be there....in fact, those costs will go up. Keep in mind this will abolish FEDERAL income tax...this has nothing to do with State income tax. Even then, you will still be liable for sales tax, use tax, property tax, business and occupation tax, excise tax, franchise tax, etc., etc.
actually the preparation involved will dwindle drastically for taxes. Not just for businesses, but also for the average tax payer. We will eliminate the need to pay H&R block to do our personal taxes. We will eliminate 67,000 pages of tax code which NO CPA could possibly understand fully, and replace it with 150 pages. Think i'm wrong? Look at almost every appointed member of Obama's cabinet. Everyone has tax issues!

Just Ed wrote:...and you don't want to get me started on the illegal alien discussion. All I will say is this: If you, as an employer, pay wages, then you are required to withhold tax on your employees - it doesn't matter if they are legal or not. If employers aren't withholding taxes on those wages, then it isn't the "illegal aliens" that are the problem - it's the U.S. employer that is. Once those wages are withheld, then it is up to said "illegal alien" to file for a refund on those withheld wages. The issue becomes an issue of identity theft - not an issue about whether or not someone pays their taxes. Think about that.


hold on here.... the fact that it is illegal does not change the fact that there is upwards of $2trillion in untaxed annual under the table payroll. Be it illegal immigrants or citizens who chose to partake in questionable work. There will always be people dodging the legal work force, but they still buy their groceries. the FairTax equalizes that tax paying playground.

yes, employers are not supposed to employ or hire illegally.... what a perfect world that would be. But we all know what's really going on. Drug Dealers and Prostitutes as well.
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Re: FairTax discussion

Postby Rat Creek » Thu Mar 19, 2009 2:55 pm

I have the disaster we call our tax code on my desk as I write this. In the folders, I have receipts for: real estate tax (2) , personal property tax (8), sales tax on vehicles (2), W-2, 1099-B, 1098 (2), 1098-T (3), 1099-R, 1099 Consolidated, 1099-DIV, 1099-INT (2), Charitable Contributions (18) and a host of other documents including last year’s disaster.

There are much better ways to go and either the Fair Tax or Flat Tax would be a leap forward.

Even if my tax bill went up slightly, we could stop this charade. The purpose of the tax code is to separate us from our money. I get that. Just simplify it.

Let people be free to do what they want without a tax penalty or reward. If you want to rent, so be it. If you have a hefty mortgage, should you get a tax break? I don’t think so and I have two mortgages.

No, this will not eliminate all tax cheats. I can still pay cash to someone or barter, but that is no different than it is now. The difference is the retail outlets will become the tax collection system, which they are already, so even the tax cheat gets to pay taxes under the new system.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 3:08 pm

Also, Ed,

I don't want this to turn into a bickering match, and I tend to get heated when I feel passionate about something :huh:


I do believe that the fairtax is a much better proposal than what we currently have.

I spend a lot of time contemplating, asking questions, researching, and discussing the tax. I know it's not perfect. Trust me on that. But I do believe that it is better than our current setup.

I also feel that there is a strong likely hood that the FairTax could turn America into a TaxHaven for other manufacturers worldwide, and could create a second Industrial Revolution for us. and bring back tons of jobs, and create a generally wealthy nation of individuals.


Consider Chrysler. When they merged with Daimler they did a full study on what the overall tax impact would be on Chrysler-Daimilar (an American company) vs Daimler-Chrysler (a German company). In the end, they remained Daimlier Chrysler because the VAT saved them 20% in taxes. How could that change if we went to the FairTax?


many people will pay less taxes, some will pay more (rightly so!) but in all, the government will remain revenue neutral and all shoudl be treated fairer.

remember we did not have an income tax until 1913, and we did not have withholdings until world war 2.
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Re: FairTax discussion

Postby Just Ed » Thu Mar 19, 2009 3:14 pm

Let me ask you....what is your effective tax rate. When it's all said and done, on your income taxes, what do you pay? To say....

That's fine, but you're not likely going to get 100% of your taxes back on April 15th. Especially not SS and Medi.


Tells me you don't understand the income tax system. You are correct that you will not get 100% of your taxes back....I currently get 87% of those taxes paid back....my EFFECTIVE tax rate is 13% Ask your tax return preparer to tell you what your effective tax rate is on your Federal return....if you use Turbo Tax there is a whole report that the software produces telling you the same thing.

I am comparing apples to apples. What you're failing to understand is the FairTax only relates to the FEDERAL INCOME tax. It doesn't replace anything else.

....another thing to consider....this is a CONSUMPTION based tax. The tax is passed on to the end user. Let me give you some examples about how the current sales tax (CONSUMPTION based tax) affects the "embedded costs" you keep referring to.

When you make beer, the wholesaler (Bud, Coors, etc.) is required to pay sales tax on the yeast purchased for the beer....the argument is that the yeast die in the production of the beer....therefore the wholesaler is the "end user" of the product...not the consumer.

If you work at a metals manufacturing facility or a machinery manufacturing facility that uses abrasives to polish metals....those abrasives (sandpaper, sand, etc.) are subject to the consumption tax because the manufacturer is the "end user" of the abrasives.

In both instances above...the sales tax is factored into the cost of production...it's embedded in there along with wages and income taxes. That will not change.

To relate that to this forum....there is currently an excise tax on fishing sporting goods manufacturers...this is an embedded cost and is not going away because it's not an INCOME tax....do a Google search on the Dingle-Johnson Act and the Wallop-Breaux Amendment.

Don't tell me there won't be embedded costs in the future....I know how the tax system works. I have a copy of the Internal Revenue Code (two volumes) as well as the Income Tax Regulations (all six volumes) sitting here next to me at my desk. I also understand that there are over 166,000 OTHER taxing jurisdictions in the United States from a CONSUMPTION tax perspective.

This will not make things easier and it is counter productive to what taxes are intended to do. You can't influence consumer behavior (which our current taxing system does) through a flat tax (or FairTax).....and if you think it's going to be cheaper for you in the long run, then you're in for a huge surprise.

Seriously, your profile says your in Washington....your Business and Occupation tax at the state and local levels are not based on income...they aren't going away.

I respect the fact that you're thinking it's a good idea....and it's a great topic to think about (coming from a tax guy) but honestly, look at both sides.....there's a reason why this was proposed in 1999 and it has never made it out of committee.
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Re: FairTax discussion

Postby Just Ed » Thu Mar 19, 2009 4:38 pm

Was just thinking about the last post and I don't think I made myself clear on the B & O Tax issue or how to look at it.

There are various jurisdictions throughout the country that tax based on Gross Receipts. Washington (and other jurisdictions like SEATAC) have a tax on gross receipts in one form or another. In Washington it's called the "Business and Occupation Tax". In New York it's outlined in §186c and §186e. A lot of folks are under the assumption that tax is not subject to tax. That is not true.

Say you have a $100 transaction and per Dustin's example 22% of that includes Federal Tax (embedded cost). Currently, that also includes an embedded cost to the business of .00471 % Washington B & O Tax.

When that item is sold currently, the consumer pays another 8% on sales tax ($8) for a total cost of $108 at retail and the business would owe an additional $.51 on the transaction for B & O Tax.

Under the FairTax plan, let's eliminate that Federal Income tax so the transaction is $88. In this case, $88 goes to the retailer, the consumer pays $7.04 in sales tax, $26.40 in Federal sales tax (FairTax) for a total cost to the consumer of $121.44. Since the B & O tax is based on gross receipts, the retailer will need to pay $.57 on that transaction....thus increasing the cost of that product by 11% with relation to the gross receipts tax. If that item is sold in a local jurisdiction that also has B & O (Burien, SeaTac, etc.) then that cost goes up there as well.

What's the net difference.....

The cost of the product (due to gross receipts taxes) stays about the same washing out that "22% benefit".
The cost to the consumer goes up....as in my instance my effective tax rate goes from 13% to 30%
The State of Washington gets an even bigger benefit increasing B & O tax revenue at the expense of the wholesaler

....another thing to think about....most retired folks are getting TAX FREE benefits already because they are receiving social security benefits that they've paid into their whole lives. Our population is getting older so you are going to have a majority of the population (at some point within the next 10 - 20 years) receiving a tax free income anyway. Suddenly, they are being taxed at 30% on their social security earnings....that they're SUPPOSED to be getting tax free.

The current system is complicated - true, it's not perfect. But a quick fix like the FairTax will increase production costs and put a lot of people into poverty - including senior citizens.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 4:52 pm

Just Ed wrote:Was just thinking about the last post and I don't think I made myself clear on the B & O Tax issue or how to look at it.

There are various jurisdictions throughout the country that tax based on Gross Receipts. Washington (and other jurisdictions like SEATAC) have a tax on gross receipts in one form or another. In Washington it's called the "Business and Occupation Tax". In New York it's outlined in §186c and §186e. A lot of folks are under the assumption that tax is not subject to tax. That is not true.


What's the net difference.....

The cost of the product (due to gross receipts taxes) stays about the same washing out that "22% benefit".
The cost to the consumer goes up....as in my instance my effective tax rate goes from 13% to 30%
The State of Washington gets an even bigger benefit increasing B & O tax revenue at the expense of the wholesaler

....another thing to think about....most retired folks are getting TAX FREE benefits already because they are receiving social security benefits that they've paid into their whole lives. Our population is getting older so you are going to have a majority of the population (at some point within the next 10 - 20 years) receiving a tax free income anyway. Suddenly, they are being taxed at 30% on their social security earnings....that they're SUPPOSED to be getting tax free.

The current system is complicated - true, it's not perfect. But a quick fix like the FairTax will increase production costs and put a lot of people into poverty - including senior citizens.



you asked me a lot of questions and I intend to answer them but I have five mintues and a cup of coffee so I wanted to look at this:


Say you have a $100 transaction and per Dustin's example 22% of that includes Federal Tax (embedded cost). Currently, that also includes an embedded cost to the business of .00471 % Washington B & O Tax.

When that item is sold currently, the consumer pays another 8% on sales tax ($8) for a total cost of $108 at retail and the business would owe an additional $.51 on the transaction for B & O Tax.

Under the FairTax plan, let's eliminate that Federal Income tax so the transaction is $88. In this case, $88 goes to the retailer, the consumer pays $7.04 in sales tax, $26.40 in Federal sales tax (FairTax) for a total cost to the consumer of $121.44. Since the B & O tax is based on gross receipts, the retailer will need to pay $.57 on that transaction....thus increasing the cost of that product by 11% with relation to the gross receipts tax. If that item is sold in a local jurisdiction that also has B & O (Burien, SeaTac, etc.) then that cost goes up there as well.


You started with an $88 item after eliminating the federal income tax. are you referring to the 22% embedded tax on the $100 item? if so we'd have to start at $78 ($100-22%)... $78 item plus the 23% inclusive fair tax puts the item at $101.29. ($.477 B&O).

unless I'm missing something, which I could be!!

You are right, in Washington we have a sales tax, and it's higher than your example. But I have that now no matter what I pay, and in addition to both my income tax and embedded taxes.

and in regards to items used by manufactures, that is a question i'm still trying to sort the details on because in many ways, you are describing a VAT.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 4:57 pm

again, i could be missing something, but If my example is correct, we would be paying an extra $1 or so on every hundred spent, but saving (in your example...) what, $13 or more per $100 earned?



you also mention those who are retired and living 'tax free'. Keep in mind, they are paying that 22% embedded tax already. So their $100 coat will only become $102, but this also creates a new revenue stream for Social Security and medi, without which, we all know those tax free incomes will probably die in 20-40 years anyways. Unless we raise taxes.
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 5:09 pm

Ed, what did you say you did for a living? are you a CPA?
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Re: FairTax discussion

Postby Indaswamp » Thu Mar 19, 2009 5:18 pm

This ought to shed some light on this subject.
Former Comptroller General to the United States (head accountant),
Non-profit organization to educate Americans.....

http://www.pgpf.org/resources/PGPFCitizensGuide.pdf
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Re: FairTax discussion

Postby Dustin07 » Thu Mar 19, 2009 5:29 pm

Indaswamp wrote:This ought to shed some light on this subject.
Former Comptroller General to the United States (head accountant),
Non-profit organization to educate Americans.....

http://www.pgpf.org/resources/PGPFCitizensGuide.pdf



WE CAN turn those numbers around. I know we can. :thumbsup:
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Re: FairTax discussion

Postby Just Ed » Thu Mar 19, 2009 5:53 pm

Dustin07 wrote:Ed, what did you say you did for a living? are you a CPA?


I'm a tax guy....not an accountant...there's a difference :smile:

I probably work for your local phone company (there are two in your area - I work for one of them)...I specialize in the tax controversy area and defend the company in front of jurisdictional tax auditors. I did income tax between 1992 and 1998 then I moved over into the transaction tax area (sales, use, gross receipts, excise, etc., etc.).
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Re: FairTax discussion

Postby jrockncash » Thu Mar 19, 2009 7:33 pm

:lol: Man I hope that job pays good because it sounds like a big bag of gay to me.
There is more value to land not developed than simply monetary. Aldo Leopold

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Re: FairTax discussion

Postby Smackaduck » Thu Mar 19, 2009 7:46 pm

I hate to change the subject but how does one go about getting 87 percent of their taxes back at the end of the year, or did I misread that. Cause I got way less than that.
If they're dumb enough to be lured in by plastic you're really just doing them a favor.

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