Obligatory Photos, FairTax Babes
Posted on 09/03/2006 5:18:40 AM PDT by Man50D
Abolish the federal income tax!
No more taxes on savings and investments!
A "Fair Tax" can completely fund the federal government, Social Security and Medicare!
You control how much you spend!
So what are we waiting for?
You, the taxpayers of America burdened with an income tax that is costly, wasteful and sinking America into inevitable bankruptcy. All current forms of federal taxation would end! You would keep 100 percent of your paycheck. You control how you spend your paycheck. It's your money. You make the decisions as to how you want to spend your money.
The Fair Tax would create more jobs and give the USA a level playing field when selling overseas. United States Senator John Linder (R-Georgia) is sponsoring the "Fair Tax Act of 2005." If enacted by Congress, it would accomplish all of the above. Simple. Easy. And affordable.
It's the best way to downsize government without disrupting the economy.
To join the "Fair Tax" movement in America, just sign the "Economic Freedom & Fairness" Petition supporting forward-thinking solutions. Go to www.grassfire.net and liberate the working class of taxpayers. Grassfire is trying to give the working class the same kind of freedom America's founders gave to those who joined the American Revolution in 1776 with the "Declaration of Independence." We won the Revolutionary War, but have lost our country since the 16th Amendment (income tax) became "Law" in 1913.
(Excerpt) Read more at bayshorenews.com ...
WAGES: It has been made clear by many proponents of the FairTax that they are expecting 100% of their current gross pay, and that many employer/employee wage relationships, including those for government workers are controlled by contract. So, we'll assume every wage earner gets to keep 100% of their current gross pay. Everyone can figure out for him or herself what that gives them in terms of a take-home pay increase.
BUSINESS COSTS: If we assume that businesses get to keep their half of the payroll taxes (7.65% of all payroll costs up to first $95k per employee), plus taxes on corporate profits (average <2% of Cost of Goods sold) and some tax compliance savings (being generous we'll call this 1% savings), this gives the business about 8% of cost savings with which to potentially reduce prices.
PRICES: For domestic goods, if we assume that the entire 8% is passed along to the consumer, this means that pre-tax prices will be 92% of present day prices. That $10 twelve pack will now be $9.20. Of course, the twelve pack of imported beer is still $10 pre-tax. Once the 30% FairTax is added, the price of the domestic beer will be $11.96 and the price of the imported beer will be $13.00 even. So, domestic prices will go up about 20% and imported item prices will go up about 30%.
GOVERNMENT EXPENSES: Since the government expects this plan to enable them to purchase the same things they purchase now, they will need to raise sufficient revenue in order to achieve purchasing power parity. Since they will be paying the 30% FairTax on every item, we can assume that for stuff they buy, they will see the same 20% price increase on domestic items and 30% increase on imported items as other end consumers. So they will need to increase their dollar intake by this 20%+ to enable them to buy the same amount of stuff. And, of course all government salaries will have the 30% FairTax paid on the salary, less the employer half of the payroll taxes, so this is a net 22.35% increase in the cost of the entire payroll of the US government (and states too, but that is another can of worms).
ENTITLEMENT COSTS: Since the social security payments are linked to CPI, when this 20%+ price rise slams through the economy all the social security checks will have to be raised to cover this massive FairTax caused inflation. They will rise by at least 20%, and a litle more because the basket of goods will include some imported items like oil. Medicare/medical expenses will have the FairTax added, for a 20%+ increase.
GOVERNMENT PURCHASING POWER PARITY: with the cost of Payroll, plus everything they buy, plus the entitlements, all going up 20% plus we can assume that the governement will need to collect approximately 20%+ more of the new inflated dollars in order to buy what they are today with today's more stable dollars.
FAIR TAX RATE: Assuming nothing else changes regarding purchasing behavior, size of the government, etc. this means that the 30% FairTax would need to immediately raised 20% (to 36%) just to bring in all the inflated dollars that are required to fund the govt at present level. The price of domestic beer is now $12.50 and the import is $13.60. This assumes no evasion and no reduction in spending by consumers on new goods and services when the large sales tax is imposed. (an unrealistic assumption by the FairTaxers)
SAVED MONEY: All dollars that are post-tax savings would be devalued by the FairTax inflation by 20% in terms of what they can buy with their hard-earned and saved after-tax money.
Does this sound like a utopia to anyone? Isn't it very likely that a 36% sales tax (or much higher like 50%) will cause consumption to suffer and/or transactions driven into a barter system or the black market where they cannot be taxed. And every dollar that is taken from the legitimate economy is another increase that is needed in the FairTax rate in order to feed the government the amount of money it needs.
Isn't is likely that we will end up with an income tax again on top of the FairTax when this all plays out?
And once people either stop buying, or buy used, or barter for services, or buy on the black market, or funnel purchases through their businesses for a tax exemption, it is very likely that the FairTax inclusive rate would be 33%-- which is an exclusive rate of 50%, making the problem worse.
The IRS sales tax?
Fair Taxers and lying, soup and sandwich.
I think either method of calculating effective rate is defensible. One, the rebate is spent on goods/services beyond that which one could buy with earnings alone, the other using the rebate merely to offset tax paid.
IMO it would be different depending on the situation; ie do I use the rebate to offset taxes I incurr spending my earnings? Or do I try to spend every single dime and spend the rebate on goods and services too?
I look at both rates, just b/c I'm curious. But either can be used. I would venture that the pafairtax uses the method where the rebate is used only to offset tax - but I don't know that. I haven't looked at the site too carefully - which is one of the reasons I wanted others to do so.
Besides their definition of effective rate (which encompasses both of your observations), is there anything else about the site that is questioned?
BTW, thank you for the appropriate reply.
Oh, it's an emanation from a penumbra.
What errors are made on this website?
Just as I thought, they DO calculate the effective FairTax rate wrong (of course, it's understated).
To calculate the effective FairTax rate you must divide net FairTax paid by income. Net FairTax paid is gross FairTax paid minus the "prebate." Gross FairTax paid is gross spending times the FairTax inclusive rate. Gross spending is income plus the "prebate."
For a family of four ($6,072 annual "prebate") with $100,000 in income they list the effective FairTax rate as 16.93%. Let's do the math:
So the actual effective FairTax rate is 18.32%, not the 16.93% the site says.
100,000 minus tax-free spending of 26,400=73600
73600*.23=16928
16928/100,000=16.93%
Either way is acceptable, but IMO they should indicate that one is not spending the rebate, but rather applying it to taxes on necessities (or whatever). So I don't think they're doing it wrong, but they're not being clear.
What the pafairtax.org site does that I do not do is to consider non-taxed spending. In all of my calculations I assume 100% of spending is on taxables, unless I specifically say otherwise (I save 15% of every paycheck... or something).
So they don't do it incorrectly, just the way that gives a lower number. Sounds like something boortz would do!
I think either method of calculating effective rate is defensible.So you think there are different effective rates? Only one why is accurate and it's the way I described.
One, the rebate is spent on goods/services beyond that which one could buy with earnings alone, the other using the rebate merely to offset tax paid.So you prefer the effective tax rate that is calculated with people not spending their "prebate"? The reality is that the prebate is taxed when spent. You must include that spending in any accurate calculation of the effective FairTax or you are not accounting for all the FairTax a person would pay.
He's squirming on the hook.
Is the FairTax now applied to used items and homes?
Under the nrst, that $3 will fall to say $2.75 after removing tax costs or competing with domestic sales. Then apply my effective rate of 17% and I'd need to earn $3.31 to buy a gallon.
You have apparently fallen into the trap provided - you are not considering that your buying power is reduced before you buy today via income/payroll taxes. The nrst reduces your buying power at purchase. They both reduce buying power of earnings - surely you don't think the income tax doesn't?
You could also look at it another way - and IMO should look at it both ways, as I said.No you can't look at it another way. Any other way would reduce the full burden of the FairTax.
Used itms won't exist in FairTaxopia.
Nope. That's not what I said. I think you must declare whether you are going to spend the rebate or apply it to taxed purchases.
Both the method you claim is "correct" and the pafairtax site use this method but you both fail to declare it.
Again, the difference is you assume that 100% of rebate is spent on the purchase of taxables...ie spending that is above and beyond the earnings of an individual. The pafairtax assumes that 100% of the rebate is used to offset tax on items purchased with earnings.
As I said, either is ok... but it would make sense to clarify.
I do not prefer either method. I use both. Did you read my post? Sometimes I take a ratio. Whatever the situation dictates.
The IRS inclusive tax is on income, not sales.
You're really strugging with this, aren't you?
So, have you read the Fair Tax book or not? (I ask for the second time)
And... if you don't like the Fair Tax what DO you support? What tax reform plan do you support? Or do you like things just the way they are? (I ask, again, for the second time)
Offset? By buying used items? By burying the money in the backyard?
Florida's non-inclusive tax is on sales, not income.
You asked for an example, it's pretty easy. It's just as easy to come up with an example going the other way...
I earn $100k. I save nothing. I even spend all of my prebate on taxables.
Of course the situation you choose gives a higher effective rate. Big surprise.
But doing the way you do it without clarifying would be akin to including the tax you will pay (next year) on any of this year's refund to into this year's effective rate.
It's ok to do it, but you should declare that's what you're doing to avoid misleading.
A poverty level person making 26,400 would spend all his earnings and would then have a $6072 tax bill. That $6072 is what he gets in rebates. Hence, he pays no tax. UNLESS he chooses to absorb the tax and buy with it.
It is the last UNLESS which should be clarified in your position and the pafairtax position.
Either could be correct, depending on whether one chooses to offset the tax or spend the rebate on taxables beyond earnngs.
Frankly, I'm surprised you don't see this.
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