Fair Tax Act taxes Gaming

The Fair Tax Act of 2017

If you haven't yet heard about it, you will. Filed 3-Jan-2017 in Congress, it imposes a 23% sales tax on just about everything, including the Gross Gaming Revenue (GGR) of casinos. Not sure if Tribal casinos are exempt or not. Here's a link about its effect on gaming:

Fair Tax Act Casino Impact

Oh, but wait. There's more! Everyone gets hit with a 23% sales tax on all goods and services purchased. Here's a link to the bill as filed:

Fair Tax Act of 2017

In return for this National Sales Tax (which states must collect and submit to the US Treasury), the act abolishes income tax (yup, all of it!), corporate taxes, employment & self-employment taxes, estate taxes, and gift taxes. The act also abolishes the IRS effective 2021. Unless...

OK, you knew there had to be an "unless," din'cha? The National Sales Tax terminates if the 16th amendment to the constitution (authorizing income tax) is not abolished within 7 years of this bill's passage (i.e., in 2024, a presidential election year, don'cher know?) But, by that time the IRS will be long gone, right?

Bet'cha the Devil's in the details. I confess, I haven't read all 132 pages yet, but I'm on it! Are we having fun yet?

Edit: to clarify what gets abolished. Yeah, I try to explain simply. But, Congress isn't helping.

Quote: LuckyPhow

The Fair Tax Act of 2017

If you haven't yet heard about it, you will. Filed 3-Jan-2017 in Congress, it imposes a 23% sales tax on just about everything, including the Gross Gaming Revenue (GGR) of casinos. Not sure if Tribal casinos are exempt or not. Here's a link about its effect on gaming:

Fair Tax Act Casino Impact

Oh, but wait. There's more! Everyone gets hit with a 23% sales tax on all goods and services purchased. Here's a link to the bill as filed:

Fair Tax Act of 2017

In return for this National Sales Tax (which states must collect and submit to the US Treasury), the act abolishes income tax (yup, all of it!), corporate taxes, employment & self-employment taxes, estate taxes, and gift taxes. The act also abolishes the IRS effective 2021. Unless...

OK, you knew there had to be an "unless," din'cha? The National Sales Tax terminates if the 16th amendment to the constitution (authorizing income tax) is not abolished within 7 years of this bill's passage (i.e., in 2024, a presidential election year, don'cher know?) But, by that time the IRS will be long gone, right?

Bet'cha the Devil's in the details. I confess, I haven't read all 132 pages yet, but I'm on it! Are we having fun yet?

Edit: to clarify what gets abolished. Yeah, I try to explain simply. But, Congress isn't helping.

I haven't heard about this before now.I say bs,are you sure this isn't a fake news story.

This bill was introduced in 1999,so don't hold your breath.

Quote: Hunterhill

This bill was introduced in 1999,so don't hold your breath.

Hmmm... 1999, yuh'say? Can't say I'm surprised. I'd ask for a source, but it really doesn't matter much.

Well, apparently a new sheriff just rode into Congress. The bill I referenced was introduced on 3-Jan-2017, even if its twin was previously introduced at some earlier time. IMHO, the fact that the bill went nowhere in 1999 does not mean we should ignore it now.

Is this for real or not? I haven't seen this kind of news anywhere so its hard to has if its real or not. Their is a lot of fake news on the internet right now.

"FairTax Act of 2017

This bill is a tax reform proposal that imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income and corporate income tax, employment and self-employment taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2019, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property, for property or services purchased for business, export, or investment purposes, and for state government functions.

Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines.

The states have the responsibility for administering, collecting, and remitting the sales tax to the Treasury.

Tax revenues are to be allocated among: (1) the general revenue, (2) the old-age and survivors insurance trust fund, (3) the disability insurance trust fund, (4) the hospital insurance trust fund, and (5) the federal supplementary medical insurance trust fund.

No funding is authorized for the operations of the Internal Revenue Service after FY2021.

Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this bill."

https://www.govtrack.us/congress/bills/115/hr25/summary

https://www.congress.gov/bill/114th-congress/house-bill/25/text

In the words of Aaron Rodgers...RELAX! This bill has been introduced in each Congress for about the last 10 years and has gone nowhere. I'm not sure it's gotten even a single hearing.

Legislation mandating that the College Football Playoff include 16 teams has a better chance of becoming law...

Quote: iamnomad

In the words of Aaron Rodgers...RELAX! ... Legislation mandating that the College Football Playoff include 16 teams has a better chance of becoming law...

Maybe. Maybe not.

As I said, there's a new sheriff in Congress now, so things could be different this time. Our president says he will help the poor and the poorly educated. IMHO, Congress seems to embrace whatever the rich contributors want. Think about the degree to which this proposal affects the very rich, OK?

The average US salary in 2015 was about $40K. (2014 median salary -- less distorted by higher incomes -- was $54K). Many economists suggest the Average Gross Income (AGI) is a fair measure when comparing usable incomes. About 50% of taxpayers have AGIs below the $40K average, and 4% of taxpayers have AGIs of $200K+ (1% have $500K+). The maximum US tax rate kicks in for AGIs around $425K. This table shows percentages for what the average American ($40K AGI) spends on different expenditure categories, together with "comparable" dollar amounts for 1% ($500K AGI) average salaries:

Category	50% AGI, $40K	Top 1% AGI, $500K
Housing, 35%	$14.0K	$175.0K
Transportation, 16%	$6.4K	$80.0K
Food, 13%	$5.2K	$65.0K
Ins/Pensions/SocSec, 11%/dat]	$4.4K	$55.0K (Note 1)
Clothing, Med, Fun, 15%	$6.0K	$75.0K
Donations, 3%	$1.2K	$15.0K
All Other, 7%	$2.8K	$35.0K

Note 1: Because Social Security Tax (15.3% paid by somebody, worker or employer) is collected only on first $118,500 of income, over $380K of this taxpayer has no SocSec paid, saving over $58K/year. So, the true percent is less than shown in this cell.

Note 2: Data is per consumer (i.e. for each American adult). My assumption is one must double dollar amounts for families with 2+ workers.

Note 3: Notwithstanding financial advice from rich-guy football pros like Aaron Rodgers to the contrary, I used data I believe "reasonable" in this post. Of course, the Internet slices and dices data such as this many different ways. If you want to explore on your own, you may want to start here: mybudget360.com.

Most of us can probably relate to the expenditures shown for the "average" American. But, the percentages make little sense when applied to the 1% American. IMHO it is unlikely the 1% American is spending over $15K each month on the mortgage of her/his principal, single-family residence. Also, a family of four would be hard pressed to eat $175/day on food (or $350/day with 2 incomes). And so on.

We know the 1% AGI in this example pays about $200,000 (39.6%) in income taxes (compared to $8.4K, or 21%, for the average taxpayer). The average taxpayer spends most of her/his earned income, so in return for not paying 21% in income taxes, with the Fair Tax Act they will pay 23% in sales taxes. Whatta bargain! The 1% AGI taxpayer saves 40% ($200K) in income taxes and, if s/he spends every penny of income, pays 23% ($115K) in sales tax, a savings of $85,000 IF S/HE SPENDS 100% OF INCOME, which is not likely to happen (as shown above).

Perhaps the 2017 Fair Tax Act will die a quiet death as others note occurred in previous years. However, I know where the money is, and in America money speaks -- nay, IT SCREAMS -- to Congress. As far as I can see, the big-money folks all have a dog in this fight. I won't bet on it, but I'm sure gonna watch what happens.

Edit after posting: Well, durn. I used $40K instead of $35K as average AGI. My bad. But, using the $35K only makes the difference larger that what I note in my post.

"Maybe. Maybe not.

As I said, there's a new sheriff in Congress now, so things could be different this time."

Lucky does make some interesting arguments. But...

The new sheriff is in the White House, not Congress. Still mostly the same folks on Capitol Hill. The Speaker of the House is Paul Ryan who has never supported this bill. The Chairman of the Ways and Means Committee (this panel writes the tax bills) is Kevin Brady and he has never cosponsored this bill. Brady was hand picked by Ryan for this post. In fact, in the last Congress it gained only 74 cosponsors. Rep. Mulvaney, President Trump's new Budget Director, was not one of them

Mitch McConnell leads the GOP majority in the Senate. He has not supported it. The GOP only has 52 Senate seats. Hard to see how all GOP Members would back this bill. When Treasury Secretary Designate Mnuchin testified during his confirmation hearing on taxes, he talked only about reforming the current system, not a national sales tax. Mnuchen certainly qualifies as one of the "big money" people mentioned above.

The "new sheriff", President Trump, has already outlined his tax plan and it has nothing to do with scrapping the current system in favor of a national sales tax.

Finally, the sheer scope of this bill, the radical change it would mean would work against it. There are just too many people who don't want to gamble on such a revolutionary shift in policy.

I am no expert, but I did work in Congress from 1983-2007, so I think I know slightly more than just a little bit about how things work there. Take it from me, a bolt out of the blue like doing away with the income tax in favor of a national sales tax simply is not in the cards.

I don't see a VAT replacing the federal income tax anytime soon. The problem with a VAT is it's blind to wealth -- someone who buys a toothbrush or a Tesla pays the same tax percentage regardless of their income or wealth, but that percentage is much larger relative to the income of a median-earner than it is the top 1%. Progressive income taxation gives the government more levers over economic policy than a VAT could ever do. The US is the only country without one, but the only way we'll get a national sales tax / VAT / consumption tax is in addition to the income tax, not as a replacement to it.

Quote: LuckyPhow

We know the 1% AGI in this example pays about $200,000 (39.6%) in income taxes (compared to $8.4K, or 21%, for the average taxpayer).

Also, you seemed to imply that the top 1% family with 500k AGI is paying 39.6% in taxes. I don't think that's accurate -- the vast majority of high earners are not earning their money in the form of regular wage income but as long-term capital gains, which is taxed at 20%. That's one of the factors that led to the wealth gap in the first place: the wealthy executive can decrease their *total* tax rate (= total tax / total income) by shifting their income to lower-taxed methods, such as deferred compensation or stock options, etc. The average wage-earner does not have the ability to do this, so they're stuck paying regular-income taxes and then putting whatever they can save into investments -- which for most average wage earners is only retirement accounts, if that. Barely half of Americans have any stock market investments at all....
http://www.gallup.com/poll/190883/half-americans-own-stocks-matching-record-low.aspx

Warren Buffett famously said in 2011 that his tax rate was lower than his secretary's. Back then long-term cap gains was 15% and a few other taxes hadn't been passed yet, and he claimed to have a total tax rate of 17.4% (compare that to your own total tax rate -- look at your total tax and AGI on your tax returns for last year). His rate has gone up since then but even in 2013, after the tax increases, he still said his rate was lower than anyone in his office.
http://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/

As clarification for the confusion above, AGI does not equal Taxable income. Taxable income is the figure to which the various tax rates, including the highest 39.6% rate, are applied.

Social Security Tax is 12.4% not 15.3%. The difference in these figures is 2.9% which is Medicare tax and is paid on all earned income. Plus if you make over $250K in wages you start to pay 0.9% additionally into Medicare...these individuals are paying a 30% higher marginal medicare tax bill than others.

Also there is no cap on Medicare taxes (eg the $116K cap referred to above). You pay Medicare on every dollar of "earned" income (think wages or any other compensation related to employment including deferred compensation & Stock Option income).

Also note that deferred compensation is predominately taxed at an individuals highest marginal ordinary income tax rates when the executive actually receives the income. Not some "lower tax method". Deferred Compensation is highly regulated these days where the executive must elect to defer the income before earning it which oftentimes results in them not knowing the amount of income being deferred when the election is made. For example, they must have elected to defer 50% of their 2017 year end bonus in late 2016, prior to knowing if they would even be given a bonus.

Interestingly enough, the rank and file employee oftentimes has an even better way to "defer" income and the associated income taxes. It is called their 401(k) and if more employees took advantage of it and invested the deferral in an appropriate mix of equities and bonds, that less than 50% of Americans owning stocks figure would go up.

The vast majority of stock options/restricted stock units granted to highly compensated executives/employees are in the form of Non-Qualified Stock options or stock grants that include all the income earned from the options/RSU's in the executives W-2 wages. This income is not taxed via some "lower tax method" as claimed above, that is a figment of someone's enlightened imagination. This income is taxed as ordinary wage income, subject to Medicare as well as any other normal taxes paid on regular wages at the time the associated income is received.

Please excuse the thread de-rail for accurate tax information...I know the spread of actual information without a political agenda is frowned upon here.

Quote: Paradigm

I know the spread of actual information without a political agenda is frowned upon here.

I appreciated every word you wrote until you took this shot. Some of us appreciate actual information without qualification. You have given me great advice over the years and you have made a lot of $$$ for me with your great advice. I hope others here take your advice. You are one of the best.

Cheers.

Quote: Paradigm

Please excuse the thread de-rail for accurate tax information...I know the spread of actual information without a political agenda is frowned upon here.

Many thanx for your comments. I do not frown on the spread of actual information, and usually like it best when it arrives free from any political agenda. You added light, without heat. Much appreciated.

I thought the Fair Tax Act might have some traction because the initial 2017 bill, as filed, had 35 co-sponsors. iamnomad commented that the 2016 version went nowhere with over twice that many co-sponsors. So, it now seems to me that this proposal may be something helpful to a group of representatives when they campaign in their home districts rather than as a serious initiative. (Whew!)

I don't want to put words in your mouth, but my earlier posts tried to document that such a proposal as the Fair Tax Act IMHO would provide a much greater tax benefit to wealthier folks than to the average Joe Sixpack or Jane Merlot. However well or poorly I performed, was my contention valid in your opinion? Just asking. Curious minds want to know.

Quote: teliot

I appreciated every word you wrote until you took this shot. Some of us appreciate actual information without qualification. You have given me great advice over the years and you have made a lot of $$$ for me with your great advice. I hope others here take your advice. You are one of the best.

Cheers.

Exactly what I was going to say. Post invaluable; coda took me aback. We could all use some straight facts. We could all use some healing.

Quote: beachbumbabs

We could all use some healing.

Marvin said the same thing, then his dad shot him.

Quote: beachbumbabs

Exactly what I was going to say. Post invaluable; coda took me aback. We could all use some straight facts. We could all use some healing.

I don't know why it shocked anyone.

If I'm reading this right, the IRS goes away and the Federal Government mandates State and Local agencies to pick up the burden of collecting and verifying tax collection?

Quote: billryan

If I'm reading this right, the IRS goes away and the Federal Government mandates State and Local agencies to pick up the burden of collecting and verifying tax collection?

I think that'd be partially correct; there would have to be an umbrella federal agency to collect from the states. Jmho.