The upshot of the paper is that a 23% tax inclusive rate is sufficient to maintain revenue neutrality even though the paper is a static analysis only, meaning that it does not take into account the many benefits of the FairTax for the U. S. economy and most of its taxpayers.
An excellent article by several well-respected economists - and very much worth the study ...
Hong Kong did well under a 15% tax rate, but it is a city , not a large country.
Except the paper still fraudulantly insists that governments can raise money by taxing themselves. The report also states that state governments will have to raise their tax rates to make up for the additional revenues because of the taxes imposed on the states. Not a honest third party analysis, but an analysis by a paid for fairtax shill.
It doesn't matter what the rate is. The point is that if it is a sales tax people will be constantly reminded of what their real tax rate is. From this they can make education decisions when they vote.
Whatever it might start out at, my guess is that it will steady out at around 15%.
UFT ping
Kotlikoff before the ways and means commitee April 2000:
"Tax rates:OH boy! Where do I sign up for a temporaray rate reduction (40% instead of 43%) by paying a NEW tax on the (arbitrary) rental VALUE of my own home?Simulation analysis and a variety of empirical calculations suggest that the retail sales tax rate needed for revenue neutrality under the Fair Tax, assuming no decline in the real value of government purchases, would be roughly 30 percent when measured on a tax-inclusive basis. This tax rate could be expected to decline by 3 or so percentage points over time as the economy expands. Moreover, if the Fair Tax were structured to include the consumption of existing housing services in its tax base, the initial Fair Tax rate would probably be about 3 percentage points lower. This could be accomplished by assessing the tax on the imputed rent on housing, where the calculation of imputed rent is based on a fair market valuation of housing real estate. This valuation could be done by local municipalities in the course of appraising houses for local property taxes.
A tax-inclusive consumption tax rate of 30 percent translates into a tax-exclusive consumption tax rate of 43 percent. While the 43 percent rate sounds very high, proper comparison of the Fair Tax tax rate with the current payroll and income tax rates requires evaluating the consumption tax rate on a tax-inclusive basis. Even a 30 percent tax rate may sound like a high rate. But one needs to bear in mind that middle and upper income households in America are typically in combined income tax and payroll tax marginal tax brackets of 40 percent or more and that low income Americans are typically in even higher tax brackets once one considers the phase out of the earned income tax credit. Hence, given the state of U.S. marginal taxation, 30 percent is a low number.
I'll show up and vote my conservative principals this November, but if the Republicans get tossed out I won't shed a tear.
I think after cost savings from all of the "unfair taxes" an 8-12% rate would suffice.
Oh, yeah, the reduction in force or total elimination of the IRS would furthur reduce revenue necessities. I am sure there are related agencies that could be cut as well. A thin government is a healthy government.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
As always, I'd like a sales tax PROVIDED the income tax is first removed from the constitution.
Without that, we will end up with both...it would only be a matter of time.
The great benefit of the sales tax is the freedom that it would promote. There would be freedom to pay tax when one decides whether to buy or not, there would be the freedom from government meddling in family life, church life, and business life that comes with IRS & Congressional big-brotherism, and there would be the freedom from volumes of paperwork and requirements.
I would even pay a bit more for that.
The Fair Tax, if implemented, would qualify as the biggest economy-destroying event in the world history. This is even after taking into account the decision of the Federal Reserve Board to tighten monetary supply after Black Tuesday, and the subsequent market crash in late 1929.
Many of these “well-respected economists” fail to take into account even basic economics into the application of the ‘Fair Tax’. While the fair tax is a noble undertaking the introduction of this new tax scheme would do nothing more than destroy our economy during its implementation.
First thing, the assumption that prices would decline if the Fair Tax is to be implemented is just that, an assumption. In regards to prices there is much misinformation provided by the Fair Tax proponents, the greatest being that businesses set their prices to compensate for the taxes they pay. This in itself is wildly inaccurate. Basic economic theory states that business will charge a price for a service (or product) at a rate which the market will support. In other words, it’s not businesses that have the ability to set prices for their products but rather the market. The whole purpose of a business is to provide that service or product at that market price while keeping costs down enough to enable a profit. An assumption stating that prices will decline due to the cut in taxes is an assumption that while valid is not one that can be guaranteed, or banked on.
Let us even forget that above statement for the moment, and let us assume that a drop in prices will occur due to implementation of the Fair Tax. First, we have no idea how much prices will decline any thoughts on how far they may decline is simply just a guess, no one really knows and no amount of research will give a firm amount of that decline due to market forces. However, any decline in prices will not result in more purchases of a product, as occurs and is the secret to the profitability of discount retailers in our day and age. The reason for this is psychology in the market place in a period of deflation. The best we can hope for after the implementation of the Fair Tax would be a period of stagnation or lack of economic growth. In deflationary periods people put off purchases for the belief prices will fall further, and this deferred economic policy ends up becoming self-fulfilling. People stop making purchases, businesses are left with larges amounts of goods on hand and in order to remove this inventory they stop making further purchases and reduce prices to remove their excess inventory. This type of scenario can play itself out through our entire economy throwing vast numbers of people out of work, which would create a vicious cycle. This is very akin as to what happened at the start of the great depression, people where thrown out of work and prices kept falling as there was no support for prices. This also happened to farmers even during the great dust bowl prices plummeted and created our current system of price supports for various parts of our agriculture industry. At best we can hope for scenario akin to one Japan faced during the nineties and early this decade of small declines in economic strength or a prolonged recession.
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 (case in point look at the mob and their traffic of tobacco products into New York), non removal of excise taxes, incentives for home ownership (why buy a house when you can rent and pay the same taxes?) and a new bureaucracy to manage the new taxation system.
At best we end up with a system that allows those in the higher strata of the income bracket to pass their taxes onto the middle class while avoiding any of the current methods for reducing those taxes, and at worse a system that can create the necessary ingredients for an economic collapse.
I’ll have to pass on this one.
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.
I'd personally prefer 10% or less. Have these idiots cut SPENDING for a change!
You just establish an arbitrary beginning rate, then lower it periodically until revenue to the Treasury actually falls.
That would be the optimum rate, as it would be under the current tax code.
But we can't rely on politicians to do that.
Although there is no need for it to begin with, the same thing could be done with the minimum wage. Just establish one, then index it to inflation.
This would take the political football out of the game, and we could then cause our politicians to focus (maybe) on more serious and consequential things (or further enslave us with things like Twinkie taxes, as the case may be).