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 read the stupid plan. I know what it means."
Obviously you don't; here's what the paper clerifies for you:
At this point, we need to clarify the difference between tax-inclusive and tax-exclusive sales tax rates. An example will help. Suppose a worker named Joe earns $125 and spends all of his earnings. Suppose further that he pays a tax of $25. If he were subject to an income tax, he would earn $125 before tax, $100 after tax and spend $100 at the store. Thus, he would need to earn $125 to spend $100. In the case of a sales tax, he would earn $125 and pay $125 at the store. Of the $125 paid by Joe at the store, the store would remit $25 in sales tax, meaning that Joe ends up with just $100 worth of goods and services. We may think of the tax rate as $25/$100 = 25%, which is the tax-exclusive rate (te); alternatively we may report the tax rate as $25/$125 = 20%, which is the tax-inclusive rate (ti). The 23% FairTax rate set out in H.R. 25/S. 25 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, we report tax rates in both ways in Table 5.""3.3 Tax-Inclusive versus Tax-Exclusive Rates
It can only make it worse.
groanup posted it in #38, and in many past threads you have agreed with it.
Perhaps pigdog can provide that link to the calculator?
In any event your decision is solely on your net purchasing power?
Right. LOL. You're saying that eliminating withholding and making people pay their taxes in cash monthly would make government spending worse. That's funny.
Your after tax savings will be taxed when spent. That is not in question.So would the money he's already paid tax on. The income tax would only tax the interest earned, the sales tax would tax it all...again!
Put that in your phony "effective tax calculator".
Uhm. That's what I said. That's what the phrase "after tax" means.
ABout the calculator - what's phoney about it? I assert that your claim is phoney. Prove me wrong. LOL. This should be good.
http://www.fairtaxcalculator.org/
found it above.
Snicker... as I recall, you didn't even know how to determine an effective or average tax rate. You simply used the marginal rate in ignorance. Have you learned?
Nothing I've done or not done in the past has anything to do with the results of the Fairtax on after tax savings, which is what the discussion was about before you tried to make it about me.
Now you're backpedalling. Why's that?
http://www.fairtaxcalculator.org/
Go ahead. What's phoney?
http://www.fairtaxcalculator.org/
make it easy for ya. Go ahead? Wonder if you'll disappear or namecall?
Anyway, effective rates are lower under the nrst because the base is larger. Easy.
Now go on and show what's phoney. If something's wrong with it, we all want to know. C'mon lewis!
You can take the total tax paid by the individual and divide by the earnings of the individual to figure the income tax's effective rate.
You use more than today's marginal income tax rates to figure tax due. You also use deductions, exemptions, and credits to find the actual amount (that gives an effective rate).
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.
The point though is that unless they have some sort of waiver, every roll of toilet paper states buy will cost 23% more. Every pencil, pen etc will be added to the cost of their budgets. Yes, the federalies get this money, but where does the state get it? Do they have to raise taxes in order to be able to procure all these things just to give the money over to the feds?
There has to be a waiver for state spending. It's a non starter without that.
I asserted your claim was phoney asked you to prove your assertion.That's a lie...There's no other way to put.
Snicker... as I recall, you didn't even know how to determine an effective or average tax rate. You simply used the marginal rate in ignorance. Have you learned?BTW, what's with the "snicker" and thr "heheheheh" in your posts? What are you a 9 year old girl?289 posted on 10/21/2006 8:32:53 AM PDT by Principled
Memory problems?
At this point I'd have to say yes, because I have only a few years of income earnings, and mostly savings to fund my future spending. A fair tax could of course give me an exemption from taxation for the after tax savings - a prebate on such for instance - and I could go along with it. Otherwise it is huge theft from my lifetime of thrift.
Put that in the bill, a prebate for after tax savings at the tax exclusive rate.
There are several posters on this thread alone who are using it. If you say it's phoney, we all want to know about it.
Are you going to continue to make claims that you can't even try to support? How's that make you look?
OTOH, if you would show why the calculator(calculator) is phoney, you could help everyone out. Isn't that your goal?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.