Posted on 10/19/2006 5:11:50 PM PDT by 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.
(Excerpt) Read more at people.bu.edu ...
Where you slip your tongue is not any concern of mine.
As soon as you admit the FT is just one giant red herring.
And you're correct about the revenue shifting, too, I think. The fly in the ointment is geting the Feds to do it, but with a new, decent tax system - who knows. Perhaps they'll begin to look at reason (finally).
I sure hope so.
I have better things to do than to spend my entire weekend writing an economic paper detailing how the Fair Tax is a house of cards built on a shaky foundation of assumptions. I actually find whole premise interresting and possibly cause of further research. I just find fault in it being implemented.
Keep in mind however that it would cause a massive restructering of the economy to pull off, and any restructering of an economy (one that is working should I add) can cause huge displacements.
But you do. Let's see.
First thing, the assumption that prices would decline if the Fair Tax is to be implemented is just that, an assumption.
Okay, fine. Prices don't fall. So what? You are taking home 100% of your income. It still takes 25% of your income to pay taxes. What's the difference? At least you can save a portion of it before it is stolen from you.
Now you make 100 dollars, you keep 75 after taxes.
Under a NRST you make 100 dollars you spend 100 dollars but only get the equivalent of 75 dollars worth of pre NRST goods. So what?
Basic economic theory states that business will charge a price for a service (or product) at a rate which the market will support.
You have never studied that of which you speak. The FT org has never claimed what you state. It has always been put forth that competition would cause prices to fall.
All of this is in addition to any of the other difficulties such a system would face as has already been previously mentioned; such as avoidance of taxation through a black market
It has yet to be demonstrated on these threads how a black market in Big Macs, toothpaste, milk and dental fillings will occur.
why buy a house when you can rent and pay the same taxes?
The appreciation of the value of rental units doesn't accrue to the lessee.
Please demonstrate.
But if you only bothered to read the FairTax website you would see that the question is answered in its entirety. Your accusations of being mislead are false. It is readily addressed.
http://www.fairtax.org/fairtax/faqanswers.htm#47
Not true - these assets would be taxed at the Fair Tax rate when consumed by the retirees, a rate that would probably be more than the retirement income tax rate.
Your premise was the plan is a scheme to tax retirement assets. Waving all future liability on tax deferred assets is not a very good way to tap into retirment assets, is it?
or "Scare Tax" as economic destruction would be sure to follow.
Let's assume the current income tax scheme. I take the $800,000 in savings and buy tax free municipal bond fund (APX currently paying 5.7%), I get $45,600 tax free, plus the $21,600 S/S I'd have to pay tax on at 28% rate or $6048, for an effective tax rate of 9%, considerably better than the effective FairTax of 14.6% you calculate.
But I want to buy a boat, now that I'm retired, and have a nice nest egg, and time to enjoy myself. I take $200,000 of savings and buy a nice new cruiser - and will not have to pay the $60,000 or so FairTax on this purchase.
Your list of untaxed expenditures is very strange. It would be quite revolting were the government to start taxing loan repayments, or money put into savings.
Also keep in mind that under the income tax you will be paying an additional tax amount in the form of higher prices - an amount that FairTax opponents have stipulated as 9% - on everything that you buy (even the S/S funds) - whicvh would make your income tax effective rate 24.88%.
The supposed higher price built into things due to income taxes is a debatable point. If industry still pays its workers their current pre-tax pay, rather than their current take home pay, there may not be any significant reduction in pre-FairTax price of products. To be fair, industry ought to raise workers pay by the payroll taxes the businesses would be relieved of having to pay, since the workers will now be paying that tax. Doubt that will happen though.
Nobody sane would post such BS in front of a church
My take? Absolutely no more than 10%. And make it a Constitutional law that Congress cannot borrow money unless there is a declaration of war.
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