So it has been about two weeks since our last show and, if you have listened to the most recent shows, you know that the reason for this temporary absence is because my wife and I have recently added a new member to the Preston family. Our new baby girl arrived healthy and happy and, other than the many sleepless nights, has been an absolute joy.
As I’ve been sitting awake and tending to the needs of an infant, my mind has had time to wander and think about an appropriate topic for this week’s show. Not only that, but I’ve also had time to do some in depth research on The Fair Tax podcast I promised you a few months ago.
Well through my wanderings and research, I kept coming back to all of the things that would change with the addition of this new child. I finally decided that it would be very appropriate, and convenient, to talk about considerations that need to be made when an individual goes through a significant life change.
Almost all of us at some point will go through a marriage, divorce, birth, death, or other life changing event that can have a very real and immediate impact on our financial lives. As you listen to the show I will cover some thoughts you may want to have as you encounter these life changing events. Some of these thoughts include:
- Life Insurance
- College Savings
- Estate Planning such as Trusts and Wills
- Titling of Assets
- Beneficiary Designations
As I alluded to above, I also had some time to begin my research on the very popular Fair Tax concept. After hundreds of pages of documents, numerous phone calls, a couple of books, and tons of websites, I finally realized that, in its current state, the Fair Tax is really more of a theory right now than an actual plan of action. There are so many moving parts that it is hard to do a true analysis of the credibility of this new tax system. However, I made some assumptions and constructed some spreadsheets that I think you will find compelling. What I determined, however, may not be what you were expecting and may not even be something you agree with. If that’s the case, then GREAT! Please leave comments here. I want to be very open and tell you that I don’t have this whole Fair Tax issue figured out, and I’m not sure if anyone does at this point. Even staunch proponents such as Neal Boortz have different views than that of the Fair Tax website.
If you have any insight or thoughts, please leave them here. I’m am very anxious to hear your perspectives and to gather your thoughts!
Bradley Martin says
September 24, 2009 at 9:12 amBrian I really enjoyed this podcast. My wife and I (both 27) have a 13 month old son Asa. We are having “the talk” about having another child in the next 2 years. Your podcast made some great points about life changes and planning responses to life changes. I think you are right on target with the Fairtax. It is easy to beat up on the IRS or on payroll taxes, but if something is going to be revenue neutral everyone will have to pay a lot more. I also tend to listen to Neal Boortz and agree with him on many issues. However, my wife and I (my wife is a teacher and I work for a State of Georgia law enforcement agency) are constantly told we are “evil government bureacrats”. The plan is only a theory. No one has an idea of how exactly it would work. Another issue with the Fairtax (I don’t like the name taxes in the United States have always been progressive and have never been fair) is who is going to audit records for sales tax? Wouldn’t this require state department of revenues and the IRS to audit and investigate sales tax? Supporters are just moving taxes from a payroll and income tax to a sales tax. Ask surrounding states (Tennessee and Florida) who have sales tax what can happen during a recession. States with only sales tax revenue tend to have less predictable revenue streams. So we are going to base social security, medicare, and the entire federal government spending on very unpredictable and volatile revenue streams? It doesn’t make sense. Yes changes are needed to the tax system. Many loopholes need to be removed. Relying exclusively on a “Fairtax” would be a tremendous mistake. Also politically only libertarians and ultra conservatives support the proposal. There is no chance it passes in Congress.
Peter says
October 6, 2009 at 8:28 pmFirst, congratulations on the new baby.
Second, the issue with the fair tax you’re forgetting is that while some things will cost (as in your example) 20% more, you’ll be taking home (for example) 20% more in your paycheck. So it should all balance out in the end. It would have to, otherwise it wouldn’t be revenue neutral.
In the beginning it would be hard on everyone who is used to the “old” prices, but pretty shortly when you complain that a $10 item is now $12, you’ll look in your wallet and see 20% more money and think maybe $12 isn’t so much after all. There really isn’t much difference between me paying you $100 and taking $20 of it as tax before hand leaving you $80 of purchasing power, and me paying you the full $100 and having an $80 cost $100 with the tax added on the back end. That $100 still purchases the same item or service.
That’s the whole problem with any revenue neutral tax change. If it’s not going to change the amount of money coming in (up or down) then what’s the point? Any revenue neutral change is going have some people paying more and some paying less. Then the whole discussion just changes from how much should everyone pay, to how much extra one group is going to pay and how much another group is going to save. I’m not saying the current system is good, but at least it’s a known entity and a lot of our economic infrastructure is built upon the existing system. Any change that isn’t going to alter the amount of money coming in will still end up “costing” everyone money due to the costs of changing everything. It’s like moving from one apartment to another and keeping your rent the same. You still pay the same amount each month, but now you have all the costs of moving and in the end, you’re no better off financially.