Taxing Sales under the FairTax – What Rate Works?

Boston University ^ | September 2006 | Laurence J. Kotlikoff et al

[pigdog]

As specified in Congressional bill H.R. 25/S. 25, the FairTax is a proposal to replace the federal personal income tax, corporate income tax, payroll (FICA) tax, capital gains, alternative minimum, self-employment, and estate and gifts taxes with a single-rate federal retail sales tax. The FairTax also provides a prebate to each household based on its demographic composition. The prebate is set to ensure that households pay no taxes net on spending up to the poverty level.

Bill Gale (2005) and the President’s Advisory Panel on Federal Tax Reform (2005) suggest that the effective (tax inclusive) tax rate needed to implement H.R. 25 is far higher than the proposed 23% rate. This study, which builds on Gale’s (2005) analysis, shows that a 23% rate is eminently feasible and suggests why Gale and the Tax Panel reached the opposite conclusion.

This paper begins by projecting the FairTax’s 2007 tax base net of its rebate. Next it calculates the tax rate needed to maintain the real levels of federal and state spending under the FairTax. It then determines if an effective rate of 23% would be sufficient to fund 2007 estimated spending or if not, the amount by which non-Social Security federal expenditures would need to be reduced. Finally, it shows that the FairTax imposes no additional real fiscal burdens on state and local government, notwithstanding the requirement that such governments pay the FairTax when they purchase goods and services.

[Your Nightmare]

You've got it backwards (again). The pews are part of the normal business of the church and would be purchased with their tax exempion - unless they were to be sold at retail to others.

That's a direct quote from Kotlikoff.

[Your Nightmare]

Ang government non-educational wages are taxed at 23% of the gross wages ... or did you know that???

Show me where the term "gross wage" appears in the bill.

[Your Nightmare]

You mean how you MIS-use languiage from the bill by spinning it. Just because you can't understand what it says does not mean you can interpret it correctly - in fact just the opposite ... you're intentionally wrong.

Of course you haven't been able to show where either the AFT or Kotlikoff treated government wages any different than their other consumption.

Pigdog, your inability to concede even the smallest point is pathological.

[Always Right]

More of your nonsense!!

Another one of your fine arguements. You are too ignorant to actually articulate your position (which in a way is understandable, because you are completely wrong). The only arguement you can make is, 'it is not'. Use the language in the bill and the definitions in the bill and try to say something intelligent about what it means. The language you pull out of your rear means nothing.

[Always Right]

Pigdog, your inability to concede even the smallest point is pathological.

It makes no sense. Does pigdog really think lying and acting dumb scores points with anyone? I have never witnessed such ignorance in my entire life.

[elkfersupper]

Just for the record, I believe you are dead-on with all your arguments.

You have obviously studied the Fair Tax seriously.

What you've failed to factor into your arguments is that we are not a freedom-loving people anymore.

Most of our fellow citizens actually fear freedom.

Sadly enough, that fact is well-documented in this discussion on Free Republic, of all places.

[pigdog]

I believe you're right and the owner of FR prides himself on being a "conservative" yet the opponents of the FairTax are free to run wild with personal attacks and insults with no posts pulled or posters banned.

It's hard to explain.

[pigdog]

Look in a mirror, paL. You don't even understand what was being discussed.

[elkfersupper]

It's hard to explain.

Apparently, it goes with the territory.

"Endeavour to persevere"

[pigdog]

"Of course you haven't been able to show where either the AFT or Kotlikoff treated government wages any different than their other consumption.

Pigdog, your inability to concede even the smallest point is pathological. "

Something is "pathological" all right but it's your attempts at obfuscation and word games in your attempts to defeat the FairTax by any means - no matter what.

I clearly showed that the paper by Kotlikoff et al showed that all government non-educational wages were taxed at a 23% rate on gross wages and that this was encompassed by the 23% revenue neutral rate.

To a man (sorry, lucysmom you Squirrels insisted that I was wrong, crazy, etc. hurling insult after insult and personal attack after personal attack at me (much as you're now attempting) all the while insisting that the rate was 29.87% (or typically more with some of the more rabid Squirrels).

Are you now ready to publicly admit that the rate in question is 23% (and never mind trying your little "is it inclusive or exclusive" obfuscation again) and that you were ALL wrong??? Talk about "pathological"!!!

[groanup]

I am talking about when they reinstitute the income tax on top of the sales tax due to massive revenue shortfalls with the FairTax plan.

This is exactly why you have no crediblity on these boards. You Assume!! What revenue shortfalls? Where is your economic data? Where is there a single economist who backs you up? Gale? He is paid by the income tax people. THere are links that have been repeatedly posted that show economists who predict massive growth. WHat happens with massive growth, Rob? HUH? It creates massive income and spending and jobs. WHat happens then?

And I have asked you repeatedly to show me a single economist that backs up your oft repeated claims that the 23% tax would create massive inflation instantly. You have failed to respond.

And, as I have told you over and over, your anti economists would glom onto the inflation factor with relish to disparage the FairTax. Yet none have. The imagination you have is exceptional, but when it is used to misrepresent, then you are nothing more than a shill trying to distort the truth for whomever you may believe is reading. So sad that you have to resort to the tactics of the Howard Deans of the world. Is there any greater evidence?

PLEASE start backing up your claims with something of substance.

This isn't hard. Links are your friends.

[Always Right]

OK, let's go to school.  The language of the bill is in purple, the red are my comments.

`(A) GENERAL RULE- The term `taxable property or service' means--

• (i) any property (including leaseholds of any term or rents with respect to such property) but excluding--
  • (I) intangible property, and
  • (II) used property, and
• `(ii) any service (including any financial intermediation services as determined by section 801).

NOTE:  'any service' is considered 'taxable property or service'.  Service = Taxable

`(B) SERVICE- For purposes of subparagraph (A), the term `service'--

• `(i) shall include any service performed by an employee for which the employee is paid wages or a salary by a taxable employer, and

NOTE:  Services include any service performed by which an employee is paid wage.  ie wages = service = taxable.

• `(ii) shall not include any service performed by an employee for which the employee is paid wages or a salary--
  • `(I) by an employer in the regular course of the employer's trade or business,
  • `(II) by an employer that is a not-for-profit organization (as defined in section 706),
  • `(III) by an employer that is a government enterprise (as defined in section 704), and
  • `(IV) by taxable employers to employees directly providing education and training.

NOTE:  Four and ONLY FOUR exceptions are provided to the Wages = Taxable rule.   The first has to do with employees of a business producing taxable goods or services.  The tax will be paid when the final goods or service are consumed.  The second has to do with employees of not-for-profit.  The third has to do with employees of government enterprise (government which provides paid for services/goods such as the post office).  The forth has to do with education.

Now where is the exception for all other government employees????  The government employee working for the DOD is not working for a government enterprise and is not directly providing education.  The DOD employee wages are taxable as are most government employees.  The notable exceptions are teachers and postal workers.  Unless there is an exception for other type of government employees, they are taxable. Let's not be ignorant folks.

[groanup]

Jeeze, my eyes hurt. Is this the future of debate? Make your point in tecnicolor?

[groanup]

How long did you have to work on the HTML for that? LOL.

[pigdog]

That particular can't read black and white (or color either it seems).

[lewislynn]

Are you now ready to publicly admit that the rate in question is 23% (and never mind trying your little "is it inclusive or exclusive" obfuscation again)

No it's 30% (That's what AFFT says the rate is) and never mind trying your little "is it inclusive or exclusive" obfuscation.

[pigdog]

It's a good thing you build homes instead of practice law, but I pity your customers if that's any example of your ability.

What in God's name do you think you post illustrates (except that you can post in color)??? It actually demonstrates nothing at all except your own interpretation and ignorance of what is said in the bill about taxing wages of government employees. That's no better than the spam that Robbie post all the time with his invalid vanity posts.

If you'd like to see how the government wages are taxed, read the kotlikoff et al paper. It's in there!! Spare us your half-assed legal interpretations.

[Your Nightmare]

I clearly showed that the paper by Kotlikoff et al showed that all government non-educational wages were taxed at a 23% rate on gross wages and that this was encompassed by the 23% revenue neutral rate.

No you didn't. Kotlikoff treats government wages exactly like all other government consumption - with the tax being part of the gross payment.

You always think even your most inane response (and that's saying something) "clearly shows" what you are claiming. They rarely do.

[Your Nightmare]

Jeeze, my eyes hurt. Is this the future of debate? Make your point in tecnicolor?

Looks to me like he got his inspiration from AG.

[pigdog]

No Looey - it's a 23% tax on non-educational government employees (fed, state, local) gross wages. If the gross wages are $100,000 then there is a FairTax of $23,000 which is further reduced by the 7,65% ER FICA and the ER FICA of the educational employees which also does not have to be paid.

The Kotlikoff et al paper shows his in no uncertain terms and the funds are encompassed by the 23% revenue neutral FairTax rate.