So this wasn't the FairTax. It's not admissible, remember.
Nice try but no cigar.
For, it certainly was the FairTax provisions, run to calculate revenue neutral tax rates for incorporation into the legislation.
Cover page says:
Final Report to Americans For Fair Taxation 4200 Westheimer Road,Suite 230 Houston,TX 77027-4426
Page 2 intro paragraph
"The purpose of this report is to analyze the economic impact of substituting the National Retail Sales Tax (NRST)for individual and corporate income taxes,the Medicare,Social Security, and FUTA payroll taxes,and the estate and gift taxes.1 I consider a revenue neutral substitution-one that leaves the government deficit unchanged. Finally,I focus on the impact of this fundamental tax reform on economic growth over the next quarter century."
Page 2, footnote:
"1. The NRST is described in detail by Laura Dale (1996)"
Laura Dale was the head economist in charge of the Fair Tax Project of AFT at the time.
The imposition of the NRST would produce a sharply higher tax rate on consumer goods and services, but the tenth chart shows that the initial consumption tax rate would be twenty-three percent at both federal and state and local levels or only 18.4 percent at the federal level. This would gradually rise over time,but remain below thirty percent or 23.8 percent at the federal level.
Guess what, we are now in 2004, not 1996( the initial year of the study). The NRST rates are calculated out to 2020(25yrs later) based on '96-'97 Clinton administration tax law.
Nice try but no cigar.Yes, cigar. The proposed FairTax is not 18.4%. This model has no bearing on the current proposal. Besides, Dr. Jorgenson has since realized that the rate would have to be much higher than even the one proposed.
Efficient Taxation Of Income by Dale W. Jorgensen and Kun-Young Yun, November 15, 2002
Since taxes distort resource allocation, a critical requirement for a fair comparison among alternative tax reform proposals is that all proposals must raise the same amount of revenue. It is well known that the ST and AFT [Americans for Fair Taxation] sales tax proposals fail to achieve revenue neutrality and tax rates must be increased substantially above the levels proposed by the authors of the plans.11
11 For example, see Aaron and Gale (1996) and Gale (1999)