Posted on 05/14/2006 1:59:13 PM PDT by RobFromGa
FAIRTAX: A Primer Now that the author of the bill, John Linder, admits in his co-authored book "The FairTax Book" that there in no such thing as "Keep 100% of your paycheck, while prices stay the same", let's examine where that leaves the FairTax:
WAGES: It has been made clear by many proponents of the FairTax that they are expecting 100% of their current gross pay, and that many employer/employee wage relationships, including those for government workers are controlled by contract. So, we'll assume every wage earner gets to keep 100% of their current gross pay. Everyone can figure out for him or herself what that gives them in terms of a take-home pay increase.
BUSINESS COSTS: If we assume that businesses get to keep their half of the payroll taxes (7.65% of all payroll costs up to first $95k per employee), plus taxes on corporate profits (average <2% of Cost of Goods sold) and some tax compliance savings (being generous we'll call this 1% savings), this gives the business about 8% of cost savings with which to potentially reduce prices.
PRICES: For domestic goods, if we assume that the entire 8% is passed along to the consumer, this means that pre-tax prices will be 92% of present day prices. That $10 twelve pack will now be $9.20. Of course, the twelve pack of imported beer is still $10 pre-tax. Once the 30% FairTax is added, the price of the domestic beer will be $11.96 and the price of the imported beer will be $13.00 even. So, domestic prices will go up about 20% and imported item prices will go up about 30%.
GOVERNMENT EXPENSES: Since the government expects this plan to enable them to purchase the same things they purchase now, they will need to raise sufficient revenue in order to achieve purchasing power parity. Since they will be paying the 30% FairTax on every item, we can assume that for stuff they buy, they will see the same 20% price increase on domestic items and 30% increase on imported items as other end consumers. So they will need to increase their dollar intake by this 20%+ to enable them to buy the same amount of stuff. And, of course all government salaries will have the 30% FairTax paid on the salary, less the employer half of the payroll taxes, so this is a net 22.35% increase in the cost of the entire payroll of the US government (and states too, but that is another can of worms).
ENTITLEMENT COSTS: Since the social security payments are linked to CPI, when this 20%+ price rise slams through the economy all the social security checks will have to be raised to cover this massive FairTax caused inflation. They will rise by at least 20%, and a litle more because the basket of goods will include some imported items like oil. Medicare/medical expenses will have the FairTax added, for a 20%+ increase.
GOVERNMENT PURCHASING POWER PARITY: with the cost of Payroll, plus everything they buy, plus the entitlements, all going up 20% plus we can assume that the governement will need to collect approximately 20%+ more of the new inflated dollars in order to buy what they are today with today's more stable dollars.
FAIR TAX RATE: Assuming nothing else changes regarding purchasing behavior, size of the government, etc. this means that the 30% FairTax would need to immediately raised 20% (to 36%) just to bring in all the inflated dollars that are required to fund the govt at present level. The price of domestic beer is now $12.50 and the import is $13.60.
SAVED MONEY: All dollars that are post-tax savings would be devalued by the FairTax inflation by 20% in terms of what they can buy with their hard-earned and saved money.
Does this sound like a utoia to anyone? Isn't it very likely that a 36% sales tax will cause consumption to suffer and/or transactions driven into a barter system or the black market where they cannot be taxed. And every dollar that is taken from the legitimate economy is another increase that is needed in the FairTax rate in order to feed the government the amount of money it needs.
Isn't is likely that we will end up with an income tax again on top of the FairTax when this all plays out?
In the present version of the bill it's 8.09%. Oh, yeah - for all you inquiring minds, that's tax inclusive.No it's not 8.09%. You can't do simple math like that with inclusive sales tax rates.
The Flat Tax is a consumption tax - it doesn't tax gross incomeThe Fairtax is a consumption tax - it taxes "gross payments". If you're a service business gross payments is also gross income.
He also continues to be ignorant of what a VAT is. THe guy is ignorant. Cut him some slack.
The flat tax and the nrst are both consumption taxes. THey both tax consumption. Did that escape you?
The flat tax and the nrst are both consumption taxes. THey both tax consumption.What part of a government employee's wage, salary and benefit do I consume?
The only thing I can figure at this point that causes soooo much anger from you folks is that I know much more than you're willing to admit, and have cut waaay too close to the bone posting rational arguments against your fairy tax. I own stock in Duct tape, so feel free to use all you'd like to wrap your heads before they explode. I helps the EMT's find all the pieces. That is, of course, if they can find the trailer park.
Maybe you should see what makes them both consumption taxes. Maybe you'd be surprised to see that an employee of the federal government has tax withheld and sent to his employer... the federal government.
But - the nrst does have that characterisitic.
It amuses me - not angers me - that you carry on like such a child pretending to know the nrst.
Although you deny being a young 'un, I don't believe you.
http://www.freerepublic.com/focus/f-news/1632169/posts?page=49#49
don't you remember that little lapse?
I think the trailer park comment is priceless coming from you.
Maybe you'd be surprised to see that an employee of the federal government has tax withheld and sent to his employer... the federal governmentWouldn't that same employee also pay the Fairtax sent to his employer...the federal government?
Your point is?
yes.
Your point is?
You can do it lewis.
http://www.nrf.com/content/default.asp?folder=press/release2005&file=nrst-imports2.htm&bhcp=1
exerpt:
NATIONAL RETAIL FEDERATION NEWS RELEASE THE VOICE OF RETAIL WORLDWIDE WASHINGTON, D.C.,
November 1, 2005 —
Consumer prices for products ranging from clothing to gasoline could increase by nearly one-third under a proposal to tax imports included in a report submitted to Treasury Secretary John Snow today by the President’s Advisory Panel on Federal Tax Reform, the National Retail Federation said. NRF urged Snow, President Bush and Congress to reject the proposal.
“This proposal amounts to a huge new tax increase for American consumers that would dramatically drive up the price of everyday necessities,” NRF President and CEO Tracy Mullin said. “The Advisory Panel seems to have forgotten that the majority of consumer products sold in U.S. stores are made overseas. We’re talking about everything from underwear to gas for our cars, and virtually all of the toys that go under the tree during the holidays. If the prices of those products jump by a third, consumer spending is going to go into a tailspin and take a lot of jobs along with it. Much of the Advisory Panel’s report would bring us the simplification that our tax code so badly needs. We should focus on adopting those aspects and not on provisions that drive up costs for consumers.”
continues..
The panel rejected a controversial proposal to replace the income tax system with a National Retail Sales Tax, which the Treasury Department said could have required a tax rate as high as 84 percent. NRF argued that the NRST would prove devastating for consumer spending and the nation’s economy, and the Advisory Panel agreed with NRF’s arguments that the tax would be highly regressive and require too high a rate. The panel also rejected an add-on Value Added Tax, which NRF said would also have a chilling effect on consumer spending.
The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet and independent stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.4 million U.S. retail establishments, more than 23 million employees - about one in five American workers - and 2004 sales of $4.1 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.
You folks are pitiful.
Well, I didn't omit it. You are saying so to hide your ignorance of the nrst bill in congress. Second, the nrf is not the arbiter of facts.
Do you know why they oppose a tax system other than the existing income tax? If you ask them, they'll tell you. It's no secret... it's because the existing tax system discourages saving money and encourages spending it.
They want us to spend all our money. They want to prevent us from saving. Funny you'd even think I'd omit that. This is just another component of the issue about which you're uninformed.
Of course, that happens in spades today. But what is the story with spending? Take a looksee here. Even folks who report waaaaay below the poverty line in income end up spending up to and above it. Shoot, the poor have cell phones, cable tv, and buy beer and smokes in the USA.
When you get a tax refund on April 15, they are returning back money to those people who overpaid their taxes. Not everyone gets a tax refund.
The prebate, on the other hand, is given to every person regardless of what they actually paid in sales taxes. It is based on the assumption that everyone will pay at least that amount which is not necessarily a valid assumption.
The prebte puts every American on the public teat, and provides an obvious place for the political social engineering and income redistribution to begin...
I never said otherwise. Did you mean to post to someone else?
Beyond that, you can spend money you don't make or save.
See if you can figure out how.
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