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 ...
No the tax would be paid in closing on the house purchase price, and the closing fees, and any other service charges. And it would be included in the amount that you get the loan for, and then you would pay FairTax on every loan payment for some percentage of the interest.
And you would pay the full amount of FairTax. In this case, if the house was reduced from $300k to $276k by the elimination of 8%, then the FairTax paid would be $82,441 if the FairTax was 29.87%. (Of course, the FairTax rate would be really much higher, probably closer to 50% but I'll leave that for now).
This $82,441 would be paid at closing and added to the loan amount. You would add this $82,441 together with all the other taxable purchases (including the FairTax in part of the interest on your loan) you make over whatever time period you want (YEARS DON'T MEAN ANYTHING UNDER THE FairTax) and subtract the prebate entitlement welfare payment to CALCULATE your actual rate.
You would have to spend nothing else (besides the interest) for probably ten plus years in order to get your FairTax "effective" rate down to 15%. And it is likley that as the FairTax system started to break down, the entitlement prebates would be eliminated completely for anyone who could still afford a $300,000 house.
The same thing it was for last time ... a rebate of tax paid. And now we realize you'll make the claim that such a rebate means the buyer hasn't purchased the full $24,600 worth of goods and the response to that is that they certainly have since the tax is included in that $24,600. But the prebate system does not say it bill allow purchases of $24,600 worth of tax-free goods - not at all - but merely $24,600 of purchases.But he's made his $24,600 tax-inclusive purchases without the "prebate." If that's all he is suppose to be able to buy, what is the "prebate" for?
It makes not difference how you PAY for the purchase, the FairTax is levied on the transaction at the time of the closing, and the FairTax money would be remitted directly to the government shortly thereafter. They might even send one of the goons over to collect this check in person.
You are trying to make this house purchase way too mysterious.
My contention is, and has been, that the optimal FairTax rate will not collect enough revenue, and they will be forced to raise it which will actually drive more transactions underground or eliminate them, and will generate less revenue.
When that happens, they reintroduce the income tax as an emergency measure on the productive and we have the worst of both worlds.
You might do even better with a closer analysis and remember that hasn't counted your purchases under the income tax which will cost you another 9% (in hidden taxes which are there whether you wish to beliefe it or not)... that would actually make you a few percent better off under the FairTax. So if your figures are reasonably close (and remember your savings and income from it or any capital gains are not taxed under the FairTax) you wouldn't do badly at all under the FairTax.
Use the Calculator and figure it out for yourself.
Just a total classless personal attack on lucysmom, and totally uncalled for. You should mind your manners.
Bet you think the Boston Tea Party was just about taxes.
As a matter of fact, I haven't ever seen you post one word about how spending should be halted before we even talk about the method of taxation. Most of the anti's who come on these threads at least have that much conservatism in them.
Then you really haven't been paying attention.
Too bad we have people like you who invade this forum.
And I vote too.
ROTFLMAO!!!!!
As I told you - the $24,600 worth of purchases which are tax inclusive under the FairTax ... but I thought you knew that.
I'm not really interested in hearing what either one of you have to say on the subject, I'm just pointing the obvious stupidity of claiming a 15% "effective" FairTax rate on a $300,000 house.
I'm not really interested in hearing what either one of you have to say on the subject, I'm just pointing the obvious stupidity of claiming a 15% "effective" FairTax rate on a $300,000 house.
"My contention is, and has been, that the optimal FairTax rate will not collect enough revenue"
And your contention - as definitively shown by the lead-in paper - is incorrect.
In fact the FairTax will probably generate too much revenue, if anything, should the rate is left at 23%.
Do you think that anyone will pay an effective FT rate of 15% on a $300,000 house?$90,000 "effective tax" at any percentage is impressive. Does that include the 30 yrs of interest on $90,000 and the monthly Fairtax tax on the interest, or just the $90,000 out of pocket up front not including the $60,000 down payment on the real value of the house?
BTW, after the Fairtax, a $300,000 house would have to have a value of $390,000 or you'll be $90,000 upside down on day one of your purchase...That doesn't sound like much of an incentive to buy or build a new house.
So how does paying $90,000 tax on a new house increase the home buyers "purchasing power" again?
the lead in paper is a crock, and doesn't "show" anything, it is pure fiction. It is made up and isn't based on any real world behavior. It cannot show anything "definitively". The FairTax will not be able to generate the required revenue without getting rid of cash transactions, and employing armies of compliance officers with real teeth.
My contention is that the Fair Tax would generate more revenue at half of the proposed start rate.
Why don't we try it and find out?
On another note, who cares?
The federal government generates wayyyyyyy too much revenue anyway.
That's just the out of pocket tax cost. With the FairTax on part of the interest, the total FairTax on the house will probably double that.
But since we'll all live longer, and be healthier under the FairTax regime, we won't mind. There probably won't be any new houses built anymore anyway.
I agree that we need to cut spending way down. Entitlement reform is the fiscal calling of our generation and we are squandering our chances at the moment.
If you put the FairTax rate at half the proposed start rate, then you would need to have the economy double or more. That is not possible in any reasonable time frame, and it would have to be immediate to avoid a rate increase.
They need the money to pay the entitlements, and the soldiers, and the interest on the debt, and everything else they spend money on. The $2 trillion plus is not going to be reduced with this plan, and that is our number one thing that needs to be fixed. Spending reduction.
Because it is Russian Roulette with 6 bullets.
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