Underground econmy

[Dave Hess]

Did you see the movie Scar Face in which Tony Montana gets upset cause his banker calls and informs him that it will 'cost' a few extra percent to launder all his drug money.

Same thing happens in real life. 20% ain't nothing when you are making crazy $$$.

 

[Clevy]

You can wash alot of money if you are in a service based industry. Goods are tougher to hide because of the paper trail associated with first purchasing the goods. Unless of course the goods are stolen and there is no paper trail in the first place.

 

[jimbrewer]

"Any system can be cheated in small amount, but not the large numbers."

Well, I don't know about that. The "FBAR" amnesty for unreported foreign bank accounts brought in 38,000 filings. Each account averaged $100K in payment of penalties. You gotta figure that there are quite a few nickel and dime accounts, inherited accounts, technical violations. Some others have some circumstance which would muddy the water just enough to make criminal prosecution inadvisable.

If only 10% of the accounts are old-fashioned high dollar Swiss Bank tax evasion accounts, that's still 3,800 major criminals. to put it in perspective, that would be 500 people or so from the state the size of, say, Minnesota, who should be frog-marched to federal prison for 18 months or so for tax evasion.

Eric Holder is possibly the most feeble Attorney General in our history, but if he tasked his local U.S. Attorneys to prosecute a dozen or so of these so-called "pillars of the community" in each state depending on size, it would go a lot farther than any amnesty in getting compliance.


http://www.bloomberg.com/news/2013-02-20...judge-says.html

 

[mechanicx]

Originally Posted By: Cujet
Not a fan of a federal sales tax, or VAT. Those types of taxes drive people to barter, trade and they foster a huge underground economy.

Far better to have a fair income tax, with only one rate and a limited number of deductions. Everyone has "skin in the game".

The income tax is actually a very well thought out system. Yes, it's gotten out of control in recent years. But, the basic premise is sound. Get the money before it gets into the economy.


I agree. Why punish people for spending and stimulating the economy when up to 70% of the economy is consumer spending?


Sales tax is basically a regressive tax. Lower income people proportionally pay more of their income in sales tax. It's not any more fair or less fair than raising capital gains tax.

 

[daves87rs]

Originally Posted By: JHZR2
Originally Posted By: Panzerman
I think the poor need a initiative to quit being poor.


Im sure Ill catch flak for this, and it is a rough thing to say, but Ive gotten to the point where I believe most of the payments made to the "poor" are really to prevent them from excessively robbing the functional population, as it is easier to pay them then to watch them.

And I fear that the reality will be that if payments are stopped, they wont have initiative, they will just go to crime.

I wish it wasnt so, but I dont have a ton of faith that many will turn around given some impetus like this, and meanwhile we have wal-marted ourselves out of having jobs for them anyway...



Very true...and living here in MI, I could see that actually happening too. We still have very few "decent" ( ie Walmart or part time) jobs being made (Some changes are coming), so when welfare pays about the same, people just are not going to get movivated at all.....

 

[SteveSRT8]

Originally Posted By: PandaBear
It is very easy to get away with small amount of income, but for large amount, say at today's rate making more than $200k a year, would be very hard to hide and not get caught.
Same for other types of tax. It is easy to hide a $5k flat screen TV or a $20k home remodeling without paying property value based tax (by giving cash to the contractor who build it or pay cash at Bestbuy to buy it), but when you are talking about a house, a shopping mall, a 50k sqft office building, it is very hard to hide the asset and cheat on taxes.
Any system can be cheated in small amount, but not the large numbers.



This is precisely why the so-called "rich" pay the overwhelming majority of taxes collected!

No matter the solution proposed it all has to start with EVERYONE working and EVERYONE paying their taxes. Immigrants could teach some Americans about hard work.

 

[PandaBear]

Originally Posted By: mechanicx
Originally Posted By: Cujet
Not a fan of a federal sales tax, or VAT. Those types of taxes drive people to barter, trade and they foster a huge underground economy.

Far better to have a fair income tax, with only one rate and a limited number of deductions. Everyone has "skin in the game".

The income tax is actually a very well thought out system. Yes, it's gotten out of control in recent years. But, the basic premise is sound. Get the money before it gets into the economy.


I agree. Why punish people for spending and stimulating the economy when up to 70% of the economy is consumer spending?


Sales tax is basically a regressive tax. Lower income people proportionally pay more of their income in sales tax. It's not any more fair or less fair than raising capital gains tax.


Also a lot of large sales can be done with foreign purchase then transfer as personal property into the US.

Ever heard of "European Delivery" option of BMW, Mercedes, and Volvo? Wonder why you end up better off flying to Europe and drive for a few days before shipping the car back? Yup, it is a tax evasion.

 

[Panzerman]

Its all about control. They get so much information on the current systems and so many have manipulated it. Its not about fairness. Its a pill game. I know I am like most and frustrated. We have too much concern for the poor, wouldnt most of us be poor, if we didnt work. There shouldnt be a reward for not working and I feel like that is where we are.

 

[Shannow]

Except that the system HAS to have around 5% unemployment to work. When unemployment "gets too low", they up interest rates in an effort to make more people unemployed.

If the system is geared such that (say) 5% of people need to be on the bench, then the system needs to provide sufficiently for them to be healthy and able to work when it's someone else's turn on the bench.

Note that my view of his doesn't include big TVs, car leases, and annual holidays.

 

[Jarlaxle]

Originally Posted By: Panzerman
When I say Flat tax, what I really mean is a Federal sales tax. One rate and no more income tax at the end of the year. This would catch everyone, legal and illegal. Most illegals simply list as many dependants as possible and never file. Not to mention drugs dealers , gun runners etc.. who buy very nice stuff, yet pay no income tax.


How would that stop a CASH business from simply pocketing the money & not reporting transactions? They do that now!

 

[PandaBear]

Originally Posted By: Jarlaxle
Originally Posted By: Panzerman
When I say Flat tax, what I really mean is a Federal sales tax. One rate and no more income tax at the end of the year. This would catch everyone, legal and illegal. Most illegals simply list as many dependants as possible and never file. Not to mention drugs dealers , gun runners etc.. who buy very nice stuff, yet pay no income tax.


How would that stop a CASH business from simply pocketing the money & not reporting transactions? They do that now!


It would by design be a tax break for the small businesses and citizens bartering.

 

[uc50ic4more]

Originally Posted By: Jarlaxle
How would that stop a CASH business from simply pocketing the money & not reporting transactions? They do that now!


It wouldn't. So that hypothetical number (the amount of $ unreported by "cash" businesses) would remain unchanged. What WOULD change is there'd be a boatload of new tax revenue from undocumented folks who make and spend money tax-free. With a federal sales tax ALL money spent (apart from the fractional amount unreported; again, unchanged) becomes subject to tax.

Think about tax as a tax on wealth, and a sales tax (VERSUS income tax, NOT "in addition to" an income tax! We have both of those PLUS provincial sales taxes in Canada.) redefines "wealth" as being "what you spend" as opposed to "what you earn" or "what you save".

 

[Shannow]

Underground economy THRIVES on a sales tax arrangement.

To avoid cascade taxing, a shop/business/tradesman can claim the sales tax on their inputs as an offset against their tax payable.

Run two books, all the input taxes are claimed, and sales tax only on those jobs that pass through the tax books.


Yes, they still have to pay "some", but the off ledger is still pretty lucrative...and the buyer gets 9% off for paying cash.

I favour the Electronic transaction tax, 0.1% skimmed off every electronic transaction, and no other taxes....still won't stop the cash economy, but 0.1% isn't enough to make a customer switch from CC to cash...and they pay the 0.1% when they withdraw the cash anyway.

 

[PandaBear]

Originally Posted By: Shannow

I favour the Electronic transaction tax, 0.1% skimmed off every electronic transaction, and no other taxes....still won't stop the cash economy, but 0.1% isn't enough to make a customer switch from CC to cash...and they pay the 0.1% when they withdraw the cash anyway.


Credit card companies are charging 3% to the merchant right now, so 0.1% is nothing.

 

[zzyzzx]

Originally Posted By: Panzerman
I think the poor need a initiative to quit being poor. The more miserable you make them, the quicker they may change their own attitude.


I agree.

 

[javacontour]

Except it's not fair to charge one group one tax rate, and another group a higher (or lower) rate.

I shouldn't have to pay a higher rate so someone who dropped out of high school, created a half dozen children, got addicted to meth, pot or alcohol can get a discount on his/her taxes because they cannot effectively compete in the job market.

The only FAIR system is one that charges everyone the same. No breaks for being rich or poor.

Anything that does otherwise is unfair to someone. The current system is most unfair to those in the middle.

I say we give the middle class a break and start passing the tax bill back to those at both ends of the spectrum who've been paying less what the middle class have been paying.

Originally Posted By: mechanicx
Originally Posted By: Cujet
Not a fan of a federal sales tax, or VAT. Those types of taxes drive people to barter, trade and they foster a huge underground economy.

Far better to have a fair income tax, with only one rate and a limited number of deductions. Everyone has "skin in the game".

The income tax is actually a very well thought out system. Yes, it's gotten out of control in recent years. But, the basic premise is sound. Get the money before it gets into the economy.


I agree. Why punish people for spending and stimulating the economy when up to 70% of the economy is consumer spending?


Sales tax is basically a regressive tax. Lower income people proportionally pay more of their income in sales tax. It's not any more fair or less fair than raising capital gains tax.

 

[SteveSRT8]

^^^Bravo! Simply put, EVERYONE pays tax unless they are very old, blind, or otherwise unable.

Few deductions at all, a nice simple percentage. But the point being that everyone needs to help by paying their taxes.

 

[PandaBear]

Originally Posted By: javacontour
Except it's not fair to charge one group one tax rate, and another group a higher (or lower) rate.


Why not? This is what every nation on earth has been practicing for a very good reason: cost of living is relatively fix and consume the majority of income at the lower bracket income group. Go read an economic textbook and it will tell you that the higher income group has a lot more disposable income after subtracting living expense, and lower income group lives paycheck to paycheck. It also is agreed upon that any economic stimulus would work much better by focusing on the lower income group. This is in economic text book, based on historic data and proven data, not just he say or she say.

Of course, it is much easier to tax someone with 70% disposable income after food, housing, healthcare, fuel, and utility than to tax someone with 5% disposable income after food, housing, healthcare, fuel, and utility.

 

[mechanicx]

Originally Posted By: javacontour
Except it's not fair to charge one group one tax rate, and another group a higher (or lower) rate.

I shouldn't have to pay a higher rate so someone who dropped out of high school, created a half dozen children, got addicted to meth, pot or alcohol can get a discount on his/her taxes because they cannot effectively compete in the job market.

The only FAIR system is one that charges everyone the same. No breaks for being rich or poor.

Anything that does otherwise is unfair to someone. The current system is most unfair to those in the middle.

I say we give the middle class a break and start passing the tax bill back to those at both ends of the spectrum who've been paying less what the middle class have been paying.

Originally Posted By: mechanicx
Originally Posted By: Cujet
Not a fan of a federal sales tax, or VAT. Those types of taxes drive people to barter, trade and they foster a huge underground economy.

Far better to have a fair income tax, with only one rate and a limited number of deductions. Everyone has "skin in the game".

The income tax is actually a very well thought out system. Yes, it's gotten out of control in recent years. But, the basic premise is sound. Get the money before it gets into the economy.


I agree. Why punish people for spending and stimulating the economy when up to 70% of the economy is consumer spending?


Sales tax is basically a regressive tax. Lower income people proportionally pay more of their income in sales tax. It's not any more fair or less fair than raising capital gains tax.


Who said anything was fair? Wage structure isn't necessarily anything close to fair. The ones taking the most income benefit the most from services like police, fire, educational system etc. Things aren't so simple, and there's little fairness to system regardless of tax policy.

But I can basically agree with you. End all the loopholes and lobbyist and tax everyone the same rate on income, that includes capital gains. Let's say it is 20% percent or what have you. The people on the lower end would need to demand higher wages to compensate, the middle to upper middle would see a tax decrease, the wealthiest a tax increase. As much as I'd like to see a less progressive income tax, I'd like to see a less progressive income system where some are underpayed and others overpayed because they are controlling the system.

 

[mechanicx]

Originally Posted By: PandaBear
Originally Posted By: javacontour
Except it's not fair to charge one group one tax rate, and another group a higher (or lower) rate.


Why not? This is what every nation on earth has been practicing for a very good reason: cost of living is relatively fix and consume the majority of income at the lower bracket income group. Go read an economic textbook and it will tell you that the higher income group has a lot more disposable income after subtracting living expense, and lower income group lives paycheck to paycheck. It also is agreed upon that any economic stimulus would work much better by focusing on the lower income group. This is in economic text book, based on historic data and proven data, not just he say or she say.

Of course, it is much easier to tax someone with 70% disposable income after food, housing, healthcare, fuel, and utility than to tax someone with 5% disposable income after food, housing, healthcare, fuel, and utility.


Good point. And people who pay no or little income tax pay plenty of other taxes. They also spend most of their income which is far and away the most significant factor influencing the economy up to 70%. And just because a worker is payed $10/hr or $20/hr or whatever, what's to say other than arbitrary pay rate or "market" what their efforts contributed in a firm's revenue. It could be worth over $100/hr. So in the end who is really paying the taxes?

Let's say I hired someone to work for me and decided to pay them $8/hr because the "market" supposedly allows me too, and their work is bringing me $50/hr in revenue which I keep $42 and taxes want $15 of the $50. I think it would take some gall for me to complain of the unfairness of my employee paying a lower rate than I do. I'd personally be happy with $27 and allowing the employee to keep the $8 without complaining about unfairness.