For the self-employed, the $125K gross DOES include a 15.3% SS/M tax. Sorry if that wasn't clear. I figured no price drop because I wouldn't be passing along the employer-side 7.65% tax as a savings to my customers in lower prices. I didn't want to bring any assumptions about price drops into the example. That means retaining all the taxes I currently pay -- including both the full 15.3% SS/M tax on the first $90K and the 2.9% on the remaining $35K.
I was trying to keep it a simple example. If you want to get more detailed, I'd have to exclude my mortgage and property taxes from the spending subject to FairTax -- so only $53K of the spending is subject to FairTax instead of the full $70K. Which would allow me to save $25K per year under FairTax rather than the $20K in the example. And I should include the FCA and put that $2K per year into the savings as well. So I'd have $27K going into that savings account each year, and it would be worth $766K after ten years rather than the $670K in the original example. My monthly withdrawals can be $5,400 under the FairTax rather than the $2,800 under the PIT.
My example may not be typical but there are plenty of people like me. Eskimo's statement was "anybody over 50 with savings" should fear the double-taxation effect of the FairTax. Clearly, there are lots of people that don't need to fear the double-taxation effect at all.
[0% on a number lower that it would be. Golly, how fair of you.]
What does this mean ? What number should be higher than I used ? Are you suggesting the interest income from the savings should be higher ? I used the same 7% rate of return for both Income Tax and FairTax systems.
Here are the calculators I used. I encourage everybody to use them so they can understand the compounding effect of saving tax-free. Plug the result from the first calculator into the second so you can see how long that savings will last you through your retirement.
Savings build up:
http://ww2.abc13.com/Global/story.asp?S=1122978
How long will savings last: http://www.fincalc.com/ret_06.asp?id=12221
For the self-employed, the $125K gross DOES include a 15.3% SS/M tax. Sorry if that wasn't clear.So now this is a self-employeed, single, 55-year-old making $125,000. This example is getting less and less typical with each reply.
If you want to get more detailed, I'd have to exclude my mortgage and property taxes from the spending subject to FairTax -- so only $53K of the spending is subject to FairTax instead of the full $70K.The portion of mortgage interest representing the cost of financial intermediation services is taxable under the FairTax. (As is your "free" checking account and other financial services.)
My example may not be typical but there are plenty of people like me. Eskimo's statement was "anybody over 50 with savings" should fear the double-taxation effect of the FairTax. Clearly, there are lots of people that don't need to fear the double-taxation effect at all.In your post with the example you quoted eskimo as saying "damned near everyone over 50 who has saved anything will get screwed." You showed an example where someone at the extreme margin would show limited gains under certain circumstances (factor in a reasonable amount pre-tax savings and even your extreme example shows the person worse off under the FairTax) with the FairTax. You have failed to show that "damned near everyone over 50 who has saved anything [wouldn't] get screwed."