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 ...
It is quite conceivable that the price of the $300K house would go up. First off, it goes to $390K FT inclusive, right. Then because houses are sold in an auction market, and under your assumptions, income earners bidding against you in the market will have more $ in their pocket, the price will likely go higher. If some bidders make the same calculation as you, they might be willing to now pay $400K for the house that today sells for $300K. Or more if they previously were in a 32% tax bracket.
The seller will have a calculation as well. He looks around at similar houses, and wants to receive enough from the transaction so that he can buy at least equivalent - and then there is the huge tax to bear on his dream home. If he only nets $300K for a house people are willing to pay $400K for, he will not willingly sell at that price, he would like to net $400K. It may be that his economic decision would be to hold on to his house, and rent it out. Less supply, higher prices.
House prices go down under the "FairTax"! Ha, that's a good one.
You are correct, it doesn't consider that. It is pretty bad with their millions they have spent on economists, they can't get a simple calculator correct. I suspect the fairtax knows the flaws, but fairtax.org has never let the truth get in the way of spin. That philosophy has clearly rubbed off on at least one of their posters.
These aren't exactly small errors either. The prebate is about a $600 billion program, so there is $138 billion of embedded taxes that the calculator is hiding. And the vast majority of all credit card purchases are items where the fairtax is charged, so all that 'principle' is in fact taxed at the time of purchase. So there is many hundreds of billions that the fairtax calculator just conviently misses. I am not sure how the fairtax calculator can say all interest is not taxed, when the bill says it is. Fairtax.org is a propaganda machine.
Now you want to discuss the wisdom of mommies?
pigdog makes a request in his post #196:
Please give us the link(s) to the exact phrase(s) where you think you read this. Or is this something you just dreamed up especially for this post?
As you requested, I provided a link and the quote - "exact phrase"
Without a doubt, others will join you in taking your spending elsewhere. At a 30% federal rate, if we believe the FairTax hype, plus whatever the state and local rates turn out to be, it would be foolish not to.
What steps will government then take to bring retirement money and spending back home?
Without a doubt, others will join you in taking your spending elsewhere. At a 30% federal rate, if we believe the FairTax hype, plus whatever the state and local rates turn out to be, it would be foolish not to.
Wouldn't the same hold true for domestic consumption under the FairTax?
That has been one of the consequences of prop 13 in California.
That's not a "mathematical error" at all. The prebate should not be included as spendable income to have a comparative basis between the income tax and the FairTax. With the same income under the two systems the only method of reasonable comparison is to not include the prebate as though it were spendable income since there is no comparable increase on the income tax side.
No. First, the costs of the income tax are removed thereby lowering the price. Anti fair tax posters have said this decrease will be 9%. That happens first. That's why the price drops to 273,000. THEN add the nrst.
I will have to earn 15% more than that (my nrst effective rate is 15%) to pay the tax due on it. Ends up I'd have to earn 321,176.
That's less than I'd have to earn under the income tax. under the income tax, I would have to earn 400,000 because my EFFECTIVE rate is 25%.
Real prices of houses go down, not nominal prices. I'm not sure you get the difference.
Your error is assuming that it will be spent on something besides reducing taxes.
We have had this discussion before. IMO they should state this, but it isn't an error.
Just like today's tax refund amount is used to reduce one's tax burden, tax refunds under the nrst are used to reduce one's tax burden.
Inlcuding the rebate to spend and tax is like using today's refund to include in taxable income this year.
Yep. And income taxing is taxing work/production/what one puts into the economy. NRST taxes consumption/what one takes out of the economy
The calculator isn't in error for the reason you say. The calculator assumes that people will use the rebate to reduce taxes. That's not an error.It's an error. The only value the rebate has is for eventual consumption and when it's used for consumption, it is taxed. It's real value is reduced by the amount of the FairTax. You must calculate for this reduction in value when determining effective rates.
We have had this discussion before. IMO they should state this, but it isn't an error.And as usual, you ignored reason in the discussion.
Just like today's tax refund amount is used to reduce one's tax burden, tax refunds under the nrst are used to reduce one's tax burden.If today's tax refund were taxed as income, you wouldn't count the full amount of the refund toward your tax paid, would you? But today's tax refunds are exempt from taxation (for obvious reasons). The FairTax "prebate" is not exempt from taxation. It is treated just like income when used for consumption - thus it's real value is reduced from it's nominal value. You must use the real (or net of tax) value when determining effective rates. Not to do so is an error. Calculating for the real value of the "prebate" is achieved by including the FairTax paid when using the "prebate" for consumption in the gross FairTax paid.
That's not a "mathematical error" at all. The prebate should not be included as spendable income to have a comparative basis between the income tax and the FairTax.Like I said, you don't want people to spend it. Of course, it has no value unless it is spent. And when it's spent, it is taxed, thus reducing it's value.
"The only value the rebate has is for eventual consumption and when it's used for consumption"Not at all the case. It's intended value is to reduce the taxes paid and as such it is rightly not included in the calculation.
If it becomes used as additional consumption that is biasing the calculation to not be the equivalent of the same amount (without the prebate) under the income tax. The intent of the calculator is to give a taxpayer a reading of what his tax burden under the FairTax with the same income as under the income tax to be able to compare the two on an even basis. It's accurate and a good comparative tool.
"Like I said, you don't want people to spend it. Of course, it has no value unless it is spent."
Nonsense - of course it does. If you save it rather than spend it there is certainly no "loss of value". But the intent of the prebate, don't forget, is to reduce your taxes ... it's a rebate of some part of them.
Nonsense - of course it does. If you save it rather than spend it there is certainly no "loss of value".Savings have no value unless they are spent. And the return of savings on the prebate would still be taxed when spent.
"What business is it of yours to worry about whether or not I'm married or have children? I've paid my taxes on the wealth I've accumulated, supported you and your ilk for thirty years of contribution, what business is it of yours to consider how I spend my residual estate."
I'm certainly not "worried" at all about you, your family or the gazillions of dollars you claim to have, Daddy Warbucks. If you read that into any of my posts, you're sadly mistaken. I'm trying to get some cogent information from you so we can see how much BS is included with all of your whining about paying taxes. So far you've offered no valid information that I can see so I'll not bother further.
If others wish to pursue it with you that up to them but I'd have to say they'll certainly get the stream of insults and personal attacks that you've routinely demonstrated so far.
The "business" it is of mine is that it's a free country last time I looked despite your desire to flee it for selfish self-interest - and I certainly hope you do since you'll be leaving the largest tax haven in the world when you do and there'll be plenty to replace you several times over.
As for your claim that you've "... supported you and your ilk for thirty years of contribution ..." that's too, too funny since you have no idea about the financial situation of anyone you post to. I doubt you've contributed as much to society as have many on FreeRepublic - but you're certainly free to toot your own horn no matter how off-key it might be.
It's clear that you have no idea what your tax situation would be either under the income tax OR the FairTax since you won't divulge any specific information to groanup, Principled, or anyone else, You merely want to vent and proclaim how grand you are. That's fine, there are others here doing the same thing - and electrons are cheap after all.
Not at all the case. It's intended value is to reduce the taxes paid and as such it is rightly not included in the calculation.BUT IT'S VALUE IS REDUCED BECAUSE IT'S TAXED!!!
The intent of the Calculator is to offer the comparative information so some bloke spending a given amount under either system can get a handle on his FairTax effective rate. Presumably he knows his effective income tax rate (though I doubt it since hidden taxes aren't considered under the income tax).
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