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 ...
"... today's $100 coat would be $92 shelf price, and then you add the 29.87% tax and the coat costs $119.48 ..."
Untrue. The "$100 coat of today" (for which you'd have to have earned more than $114 if you had a 12.5% income tax rate) would fall to $91 (the other FairTax opponents have stipulated a 9% price decrease with income tax removal). You would then pay the $91 cost of the coat plus the FairTax at your own effective FairTax rate - which would almost always be greatly less that the effective income tax rate.
At the income tax rate cited above, your FairTax effective rate would fall to something like 7.82% making the "$100 coat" would be about $98.75 under the FairTax.
It is misleading in the extreme to use the marginal FairTax rate as though that is the cost of things under the FairTax. It isn't ... as you can see by the price of the coat.
Also, there's no "dole" or welfare. The prebate is a rebate of some part of taxes paid and so defined in the bill. It is not an entitlement. In fact the amount of money involved with the prebate is LESS that the two present large entitlements (S/S & M/C) and that amount is covered by the 23% revenue neutral rate.
As prices are lowered by the FairTax and most taxpayers have more takehome pay (disposable personal income), it's hard to think that consumption will do anything but increase, not decrease.
"Since state and local governments also pay the 29.87% on every one of their non-education purchases, salaries and employment beenfits, [sic]"
Another misstatement of fact refuted many times on these threads - as shown by the detailed economic study of the lead in post since the rate will not be 29.87% but 23% and in fact it will be reduced by the government's no longer having to pay the ER FICS - the employer's portion of income tax at 7.65% and also by the educational portion of ER FICA so the actual rate which is 23% of gross wages will actually be reduced by these two ER FICA savings.
Ignore the scare tactics. The sky is not falling!!!
Where?
I found it. They put it in the definition of services.
"when I spend it, I pay another 20+% of it "
Actually, probably nothing like that. It depends upon your own effective FairTax rate as shown in post #781 where the taxpayer who was in a 12.5% income tax effective tax rate would drop to a 7,82% effective FairTax rate. Your own effective FairTax rate can be figured out by using the Effective FairTax Rate Calculator.
Don't fall for all of the Fear Factor postings. Some taxpayers even end up with a negative rate meaning that you get money back (which is not shown by the calculator except as a 0% tax rate) .
`SEC. 2. DEFINITIONS.`(12) TAXABLE EMPLOYER-`(A) IN GENERAL- The term `taxable employer' includes--`(i) any household employing domestic servants, and`(B) EXCEPTIONS- The term `taxable employer' does not include any employer which is--
`(ii) any government except for government enterprises (as defined in section 704).`(i) engaged in a trade or business,
`(ii) a not-for-profit organization (as defined in section 706), or
`(iii) a government enterprise (as defined in section 704).
Your post is just wrong, the coat retailer will charge you the full FairTax, not some mythical made up "effective rate". The coat will cost $119.48.
The full FairTax marginal rate is the only one that will ever be applied to purchases.
And governments will pay 29.87% on top of their purchases, salaries and benefits just like I said. Your incorrect reading of the plan on this subject is one of the things that you remain wrong about, and the bill is clear on this point.
The "prebate" is a welfare payment because one needn't spend a nickel in FairTax and will still get the dole. You can't make it different just by saying so.
I found it. They put it in the definition of services.There, too! ;-)
It wouldn't be that you didn't WISH to see them because of your anti FairTax agenda would it????
So the correct way to say it would be, goods and services purchased by a Church are taxable with the exception of salaries and items purchased for intermediate sales or export.
As for the tax "minimization" stuff - you said what you said and can't retract it and your posts on different threads describing your spending habits seem to be public knowledge. If you think that's private information why put it on public threads?
I suppose since you're on a first name basis with Jim Robinson and have successfully manipulated the Mods in the past you hope to do that again?I guess the moderators must have been manipulated for you to have been suspended, huh. No way they could have done that by their own volition.
With the nrst, all spending is not taxable spending.
With the income tax...disposable income has already been taxed.
That is precisely the point. That is what makes purchasing power less under the income tax. That is what makes a $100 item cost me $133 in earnings! My disposeable income was taxed before I got to spend it.
With a NST all income is taxable,
First, we're not talking about an NST. We're talking about an NRST. There's an important difference. Second, you're wrong. No income is taxable under the nrst. Only discretionary spending is taxed. Under the nrst, not all spending is taxed. Only discretionary spending.
Usually a FairTaxer jumps in at this point and assures us that no matter what, people always spend up to and exceeding the poverty level.
There is no "fairtax" on government wages. There is no taxable sale of a good or service. Hence the tax to "include" is zero.
A $100 wage results in a $23 tax. You and Rob are the only ones who still don't get it.
There is no taxable sale of a good or service.So what? The FairTax doesn't tax sales, it taxes "gross payments for the taxable property or service." "The term 'gross payments' means payments for taxable property or services, including Federal taxes imposed by this title."
Savings bonds purchased with after (income) tax money. Let's ignore the tax-deferred stuff, as those were already accounted for in my retirement spending plan. Let's just concentrate on the principal I invested in the safest instrument on the planet: US Treasury securities.
As I understand it, for every $1000 of that, I need to adjust my retirement spending plan downward by aprox. 20+% because of the new, "Fair Tax."
I wish someone had told me about this forty years ago, before I started executing my retirement savings plan.
Don't worry too much, the FairTax isn't going to be passed. It has too many obvious flaws.
That's fine but how do you account for the 20% increase in the purchasing power of that portion?
I'd better do my best to inform the rest of my fellow boomers, so they are aware of the danger before it comes up for a vote. What forum do you think would attract the attention of the largest number of baby boomers?
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