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 ...
I've said on this very thread that prices would go up about 18-25%, and explained why. And I've said that dollars saved after-tax would therefore see a deflation in value of the same amount. Do you dispute that this would happen under the FairTax at least initially?
If you would bother to read it, every bit of that crap is addressed in the lead in article to this thread which, BTW, was written by people who actually know what they are talking about!
So how come this didn't get pulled (461)?I don't know. Maybe the fact pigdog repeated the behavior a couple of posts after being told to stop it (and a few days after being suspended, no less) had something to do with it.
I am betting he is. I don't see what another 2 day suspension would accomplish.
Or just simply that he presents it at all!
It is really just a huge conspircay. All the moderators are accountants and are afraid the fairtax might put them out of business. PD was maliciously picked on for presenting his views with grace and honesty.
I was addressing the instant inflation of the FT which would be big economic news. You are the only "economist" making that assertion. If a bill proposed in congress would cause instant inflation of 18 - 25 - or 30 %, all of which you have claimed, there would be an instant outcry from such folks as Ben Bernanke, Alan Greenspan and even William Gale. All I'm asking is how you know so much more about the economic effect than they do? Or do you have an economic paper from some archive somewhere showing the effect of the FT on purchasing power?
THis isn't the situation with a gov't employee. You are putting forth a maid (for example). The maid who is paid $100 in wages will have a tax of 29.87. She is selling a service for which you are paying a wage.
There is no service being sold for a gov't employee. Gov't services are simply provided (like a 911 operator). There is no tax to pay on the sale of the non-existent service - hence the tax is 23% of $100, or $23.
This rule is to prevent gov't from choosing to simply hire more people instead of contracting to private companies. Without the rule, gov't could hire for much less than it can contract work out.
Gee, the only ones paying for papers on the effect of the fairtax is AFFT. No one else takes it seriously enough.
Don'tcha know the rules are different depending on a few things.
THe evidence is obviously overwhelming.
Nor does the fairtax bill say there has to be anything sold. The government is considered the consumer of the $100 service of the government employee and must remit 29.87%.
You have forgotten the millions of examples showing purchasing power improves?
Oh wait.. you have in your own head an idea of what YOU think the revenue neutral rate should be.
And did you ever think that a reduction in gov't intake would be a good thing? Are you arguing against spending cuts now too?
This is too much.
I really don't care what the rate is provided it is rev neutral or less. Indeed, if it's rev neutral I'll have more purchasing power. THe ratio of my income to the total taxable income is greater than my ratio of my spending to the total taxable spending.
It is the broadening of the base that moves my effective rate from 25% to below 15%.
You can check your own effective rate here. Be sure to use both methods - you'll see a minimal difference.
Wrong, the President's salary for example is payment for a service. I think he makes $400,000 at present, I'm not going to look it up. Under the FairTax his salary becomes a taxable service and the amount of the tax is 29.87% of $400,000 which is $119,480. The gross payments (wages plus FairTax) would then total $519,480. Doing the math, $119,480 divided by $519,480 is 23%-- Voila, you are in compliance.
There is no difference between a cleaning lady (like Madeline ALbright) and any other government employee. You are seeing emanations from penumbras in making this stuff up.
Either point to the language in the bill that you think eliminates government employee wages from being taxed, or which singles them out for special tax calcuations, or give it up.
Note: The President receives many benefits too, like living in the White House and meals and cars, etc. This is all taxable under the fairTax at 29.87% as well. So are soldiers wages, and all the guns and ammo, and the roads, and levees, and the Robert Byrd Memorial Gym. Every dime taxed at 29.87%.
As if the mods have the time to read every post. Did you report it?
But rob, individuals have more than that much more money with which to pay the higher nominal prices. Remember, tax inlcusive prices are higher AND takehome pay is higher?
A $100 baseball glove will cost me $133 in earnings under the income tax.
Under the nrst, the price falls to $91 (I'll use 9% - your number). Then I'll have to pay my tax on it - using an efective rate of 15%, I'll have to pay $107. Don't be mistaken, I will have to pony up the full marginal rate at the register - $118. But I use $11 of my rebate to help pay the tax (speaking on average).
So although nominal prices rise, so does takehome... to the extent that my purchasing power ins INCREASED.
What do you think will happen to the PRICE of a gallon of milk under the FairTax. Or a car?
I say that the shelf price (pre-tax) might drop as much as 8%, making a $10 item cost $9.20. Then if the rate was only 29.87% as you all promise, the tax would be $2.75 and the total out-the-door price would be $11.95. That is 19.5% higher than it is today under the income tax.
If I had a bunch of after tax dollars and I was planning to buy a retirement home, then this same 19.5% price increase would cause me to need 19.5% more dollars to have saved up in order to buy it.
I call that instant inflation, you can call it something else if you want. The saved dollars are worth less.
Of course all the wage earning people will have more dollars because they are promised their entire paychecks. They will have more dollars and things will cost more. Prices and wages have both been inflated for the wage earner.
You think that your effective tax rate on a $300,000 house will be 15%. Until you agree that this is not the case, there is no point in discussing "effective" tax rates with you. You completely ignored all the posts that I wrote in the last couple of days on this topic and I have no interest in repeating myself.
Start about #625 and work your way through the discussion.
Once again you prove that you don't know what the "base" is.
I had worried about the same thing...the 16th Amendment needs to be repealed first. But HR25 has language in it that makes the repeal of 16 a prerequisite for implementation of the NRST.
That being said, I still think this beast is a bad idea. The problem IS spending and that needs to be addressed first before putting Band-Aids on the tax code problem.
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