Replies

No, not clever, that idea is idiotic. $23.00 is a 23% tax on the selling price of 100 dollars. If the merchant charges $129.87, he is charging a 29.87% sales tax on a $100 sale.

Rare that I stick up for YN, but he's right, you're wrong. The 23% NRST is tax-inclusive, i.e., 23% of the total price, including tax, is tax. That is, if T is the tax and P is the pre-tax price, you have:

R_i = T / ( P + T )

The tax-inclusive method is used in the NRST bill to compare it to income taxes in an equitable manner. For example, if my effective income + payroll tax rate was 23%, in order to buy a $77 item, I'd have to earn $100, pay $23 in tax, and then have $77 left over. Under the NRST, if I spend $100, I pay $23 in tax and $77 for the item, exclusive of tax.

Now, the way a sate sales tax is expressed uses a tax-exclusive method. E.g. a 5% sales tax on a $100 item yields a total bill of $105, $5 of which is tax. (The corresponding tax-inclusive rate is 5 / 105 = .0476)

Using the same variables as before, the tax exclusive rate is expressed as:

R_e = T / P

So, a 23% inclusive rate equals a 29.87% tax-exclusive rate. (Proof for the reader: plug 0.23 in for R_i and then solve simultaneous equations to get R_e.)

No, not clever, that idea is idiotic. $23.00 is a 23% tax on the selling price of 100 dollars. If the merchant charges $129.87, he is charging a 29.87% sales tax on a $100 sale.
jones

kevkrom wrote:
Rare that I stick up for YN, but he's right, you're wrong.

The 23% NRST is tax-inclusive, i.e., 23% of the total price, including tax, is tax.

Wrong. The proposed Fair Tax is simply treated as another sales tax, added to the subtotal of items purchased. Example:

Subtotal of items purchased ___ 100.00 Federal 'Fair Tax' 23% _________ 23.00
State Sales Tax 7% ____________ 7.00

Total ______________________ $130.00

FairTax
Address:http://www.fairtaxvolunteer.org/smart/faq-main.html Changed:11:33 AM on Wednesday, July 28, 2004

"How is the tax collected? Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax will simply be an additional line on the current sales tax reporting form."

No, not clever, that idea is idiotic. $23.00 is a 23% tax on the selling price of 100 dollars. If the merchant charges $129.87, he is charging a 29.87% sales tax on a $100 sale.
jones

kevkrom wrote:
Rare that I stick up for YN, but he's right, you're wrong.

The 23% NRST is tax-inclusive, i.e., 23% of the total price, including tax, is tax.

Wrong. The proposed Fair Tax is simply treated as another sales tax, added to the subtotal of items purchased. Example:

Subtotal of items purchased ___ 100.00
Federal 'Fair Tax' 23% _________ 23.00

State Sales Tax 7% ____________ 7.00

Total _____________________ $130.00

FairTax
Address:http://www.fairtaxvolunteer.org/smart/faq-main.html Changed:11:33 AM on Wednesday, July 28, 2004

"How is the tax collected? Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax will simply be an additional line on the current sales tax reporting form."