FairTaxers continue to "flex their muscles"

Americans For Fair Taxation ^ | June 19, 2007

[Man50D]

FairTaxers continue to "flex their muscles" 06/19/2007

Well over a hundred FairTaxers came to Columbia, South Carolina yesterday to let former Senator Fred Thompson know that the FairTax is an extremely important issue facing potential presidential candidates.

Amazingly, 140 out of the 300 attendees were FairTax supporters! As a result of this strong showing, the former senator noted several times how he was impressed with the FairTax and also let it be known that the FairTax is an issue he is considering as he prepares for a possible bid for the presidency.

Thanks to all of our hardworking volunteers who made this event a huge success! Now we have to get ready to take our message to Ames, Iowa on August 11th!

[Toddsterpatriot]

Your numbers are wrong anyway. COG 90 plus profit 10 plus tax of 3 is 103, not 100.

COG 90 plus profit 10 gives you sale price of 100. The government pulls their 3 out of the 10. Price is still 100.

You have to choose whether you think prices contain 3% embedded tax costs or 9% embedded tax costs. Which is it?

What is GDP? Leaving out investment, GDP is the price of all goods and services sold in the country. If corporate taxes are 3% of GDP.....

[xcamel]

I have been unable to get an answer from the FairTax proponents to the question, "Please explain how the government paying money back to itself becomes revenue". I believe that a consumption much higher than 23% would be required to truly provide the same revenue as is now collected. The designers of the FairTax have used the "tax" paid by the federal government back to itself to disguise the actual consumption tax required to be charged in order to remain "revenue neutral".

No one in their right mind would, or should support this giant red herring...

But.. for those insisting on running around like Elmer Fudd screaming "Kill the Wabbit!!!" (IRS) - I guess emotionalism trumps intellect every time.

[Principled]

COG 90 plus profit 10 gives you sale price of 100. The government pulls their 3 out of the 10. Price is still 100.,p> Right, if the gov't pulls their 3 out of the 10, then profit wasn't 10 - again your ambiguity claims another post.

And if you are looking exclusively at corporate income tax, then isn't the total tax costs in prices going to be more than 3%? Hello? Are you sticking to your 3%?

BTW, GDP can help you get to the 9% approximation of taxes per se in prices. You're making progress.

[Toddsterpatriot]

And if you are looking exclusively at corporate income tax, then isn't the total tax costs in prices going to be more than 3%?

Sure. What do you want to add? Social Security?

[Principled]

Sure. What do you want to add? Social Security?

LOL. The conversation was what portion of retail prices is actually tax costs. Not "some" tax costs.All tax costs.

It would be better if you would just say you were mistaken. But this is a load of crap. We're talking about all tax costs, not just the ones "you're thinking of". Sheesh.

[Toddsterpatriot]

The conversation was what portion of retail prices is actually tax costs

My conversation was about corporate taxes, not taxes on employees.

It would be better if you would just say you were mistaken.

Like you were on cascading? LOL!!!

We're talking about all tax costs, not just the ones "you're thinking of".

Great, tell me the ones you're thinking of and we can talk some more.

[Principled]

My conversation was about corporate taxes, not taxes on employees.

Yeah right. And our conversation about the total amount of taxes in prices led you to secretly only talk about corporate income taxes and secretly leave the rest out? LOL.

Gain some credibility man, admit your error.

[Toddsterpatriot]

And our conversation about the total amount of taxes in prices led you to secretly only talk about corporate income taxes

If you go back over the thread, you'll see I'm talking about corporate taxes, taxes a corporation pays on profits. Get it? If corporate taxes are eliminated, that will reduce prices by about 3%. If you have different numbers for corporate profits or the corporate tax rate, I'm willing to adjust my 3% estimate.

If you want to discuss how much eliminating Social Security taxes will reduce prices, let's do that. If you have any other taxes that will be eliminated, let's talk about them too.

Gain some credibility man, admit your error.

Tell you what, when you admit you were wrong about cascading, I'll admit that when I said corporate taxes, I didn't mean corporate taxes plus Social Security taxes.

[Principled]

Blah blah blah...Yeah but I was talking about..."

Yeah right.

[Toddsterpatriot]

Tell me again how cascading worked.

8.58 is more than 3%. And this was only 3 stages.

That's funny. I'll have to remember that one! I hope that wasn't an important part of the argument for the FairTax!

[lucysmom]

LOL. The conversation was what portion of retail prices is actually tax costs. Not "some" tax costs.All tax costs.

According to this article, a 500 billion dollar discrepancy exists in the FairTax numbers.

But because they used a different treatment of prices on the revenue side than they did on the spending side, it resulted in a $500 billion discrepancy that would have to be corrected if the Fair Tax system were to be adopted. This means that the 30 percent sales tax would have to be increased to cover the $500 billion shortfall. To understand the differential treatment, you have to keep in mind that all tax reform proposals have to be revenue neutral. The Fair Tax people assume that, for every dollar you spend currently on goods and services, there is an embedded 22 percent overhead cost to cover income and payroll taxes. When they calculated the government spending side of the equation for revenue neutrality, to maintain current programs, they assumed prices would decline 22 percent due to the elimination of income and payroll taxes. When they calculated the revenue side of the equation, they assumed that prices would remain fixed at the current levels, which includes the embedded 22 percent overhead. The result of the differential treatment of prices on either side of the equation results in the $500 billion discrepancy.

http://www.proliberty.com/observer/20060708.htm

So which is it guys? Will prices remain the same with the sales tax collected on current prices, or will prices fall and with that, the amount of tax collected requiring an immediate tax hike to remain revenue neutral?

Kind of renders all this debate about whether prices will fall and by how much moot.

[Toddsterpatriot]

Right, if the gov't pulls their 3 out of the 10, then profit wasn't 10 - again your ambiguity claims another post.

I guess you've never heard of pre-tax profit? LOL!

And if you are looking exclusively at corporate income tax, then isn't the total tax costs in prices going to be more than 3%?

I found this on remember's home page. Toward the bottom of the page he shows total income into Social Security as a % of GDP. Estimated for 2007 at 5%. If you take half of that as the corporate contribution, 2.5%, now we're up to about 5.5% of GDP.

You're making progress.

Yeah, but I'm not sure you are.

[lucysmom]

And then there is the matter of evasion - Gail estimates tax avoidence at 20%.

FairTaxers claim that evasion will be almost none existent because we'll all be so happy with the FairTax and our low, low marginal rates, we'll gladly hand over an additional 30% at the register.

The World Bank Public Finance page quotes Tait; "At 5 percent, the incentive to evade is probably not worth the penalties and prosecution, at 10 percent, evasion is more attractive, and at 15 – 20 percent, become extremely tempting."

If 15 - 20 percent makes tax avoidance "extremely tempting", what evil would a 30% plus tax draw out of our human nature?

[Toddsterpatriot]

I'm not as nice as Principled! I say that prices will fall FAR more than principled has stated in his example.

How far? Show me. And show me how cascading works, if you can.

[Toddsterpatriot]

That's why our manufacturing base will return virtually overnight when the Fairtax becomes law!

You don't think we have a manufacturing base now?

What do you think will happen when the approximately $6 trillion currently being held in offshore accounts in order to avoid taxes very quickly comes back into the economy?

It sounds like untaxed, offshore money will benefit from the FairTax, while onshore, already taxed money will get taxed again. Is this a selling point or a problem for the FairTax?

[remember]

I found this on remember's home page. Toward the bottom of the page he shows total income into Social Security as a % of GDP. Estimated for 2007 at 5%. If you take half of that as the corporate contribution, 2.5%, now we're up to about 5.5% of GDP.

I'm glad that you found that information useful. It is from the U.S. Budget for Fiscal Year 2005 but in 2008 Budget, the estimated figure for 2007 is still very close at 4.8% of GDP. Still, you might find more recent and complete figures by looking at the tables at http://home.att.net/~rdavis2/recsrc.html. They come from the 2008 Budget and show the revenues from Corporate Income and Social Insurance taxes. As can be seen from Table 2.4 in the Historical Tables of the 2008 Budget, Social Insurance tax revenues consist chiefly of tax revenues for Old-Age and Survivors Insurance (OAS), Disability Insurance (DI), Hospital Insurance (Medicare Part A), and Unemployment Insurance. Taking the Corporate Income tax revenues plus half of the Social Insurance tax revenues gives 2.49 + (6.35/2) = 5.665% of GDP. I believe that corporations pay all of the Unemployment Insurance so that might bump it up to about 5.8% of GDP. In any case, that's very close to your estimate of 5.5% of GDP though the composition is slightly different.

[Principled]

What happens to the other half of of FICA? Does it disappear into thin air or does someone realize savings? Either the company realizes the savings, the worker realizes a giain in take home, or the investor realized improved ROI.

Remember, I say the TOTAL of the tax cost savings for business of taxes per se will show 9%. Of course that does not include gains made by the individual. To make a reasonable conjecture about real prices, one must obviously include price reductions and gains in earnings.

Remember one of the pillars of the nrst movement is to get everyone paying the same marginal rate - so the "divide and conquer" strategy of increasing taxes - and hence increasing government size - can be minimized. Further, all of the taxes being replaced (the ones that we're trying to nail down) will paid paid at one point, not multiple points.

[Toddsterpatriot]

In any case, that's very close to your estimate of 5.5% of GDP though the composition is slightly different.

Thanks for the source and the analysis. I knew I could count on you.

Do you have an opinion on the FairTax?

[lewislynn]

What happens to the other half of of FICA? Does it disappear into thin air or does someone realize savings? Either the company realizes the savings, the worker realizes a giain in take home, or the investor realized improved ROI.

The other half of FICA is paid by the consumer. The consumer is double screwed if the other half is not included in the Fairtax 100% paycheck promise (which BTW, there is no requirement in the law regarding "paychecks").

Remember, the Fairtax replaces all those taxes. That's the reason, after the first year, the Fairtax law authorizes SS bureaucrats to determine the Fairtax rates every year...Don't take my word for it.

`(d) Old-Age, Survivors and Disability Insurance Rate- The old-age, survivors and disability insurance rate shall be determined by the Social Security Administration. The old-age, survivors and disability insurance rate shall be that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 12.4 percent tax on the Social Security wage base (including self-employment income) as determined in accordance with chapter 21 of the Internal Revenue Code most recently in effect prior to the enactment of this Act. The rate shall be determined using actuarially sound methodology and announced at least 6 months prior to the beginning of the Calendar year for which it applies.

`(e) Hospital Insurance Rate- The hospital insurance rate shall be determined by the Social Security Administration. The hospital insurance rate shall be that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 2.9 percent tax on the Medicare wage base (including self-employment income) as determined in accordance with chapter 21 of the Internal Revenue Code most recently in effect prior to the enactment of this Act. The rate shall be determined using actuarially sound methodology and announced at least 6 months prior to the beginning of the calendar year for which it applies.

`(f) Assistance- The Secretary shall provide such technical assistance as the Social Security Administration shall require to determine the old-age, survivors and disability insurance rate and the hospital insurance rate.

[Toddsterpatriot]

That's the reason, after the first year, the Fairtax law authorizes SS bureaucrats to determine the Fairtax rates every year...Don't take my word for it.

I thought the FairTax would stop Washington from raising rates because the outcry would be too powerful. They don't even need to pass new legislation to raise rates. LOL!!!