[jonestown]

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' 30% ________30.00


State Sales Tax 7% ____________ 7.00



Total ___________________ $137.00



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."
629 jonestown

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Sorry, jonestown, but you most certainly mistaken. I was confused by this intially, too.

From the FairTax FAQ you linked to:

I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter? 30 percent.

Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.

Spend that same $100 under a sales tax, you pay that same $30, and the rate is quoted as 30 percent.

631 Your Nightmare

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Fine, -- you've made your point that the actual rate proposed is 30%.

I have no idea what actual point is intended to be made by the tax 'inclusive/exclusive' rhetoric.
Do you?

[Badray]

I have no idea what actual point is intended to be made by the tax 'inclusive/exclusive' rhetoric. Do you?

My guess is that it was an early attempt to put things on an apples to apples basis. Let me backtrack for a moment.

Years ago when you financed a car or borrowed money the interest rate was was quoted as an 'add-on' rate meaning that the payment was calculated by adding on the interest to be paid each year. A 5 year loan for $10,000 at 6% add-on, the total payback would be $13,000 and the payment would be (roughly) $216.66.

Then, about 20 or 25 years ago, the feds stepped in claiming that the rate was deceptive because it didn't allow people to adequately compare loans and they instituted a stardardized way of disclosing the rate as an Annual Percentage Rate (APR). That same loan would then be quoted as (roughly) 11.50% APR. The totals would all be the same, but the higher rate had to be quoted. (Later, the Feds did the same thing with investment yields (APY).

The point of this was that everyone would be working with the same info from the same standpoint. In the above example, 11.50 APR and 6% add on sound wildly different but yielded the same cost.

The 23% versus 30% inclusive/exclusive rate stuff is pretty much the same framing things in terms of how the current tax system is calculated and expressing this in similar terms. Either way, the cost the same. I think that the planners thought the 23% rate sounded better and easier to sell to people. They didn't count on the ability of it's proponents to do the job and sell the program using the higher rate.

I hope that helps somewhat. I still get confused on the inclusive v. exclusive stuff. I just quote the 30% if I mention any rate. Generally, I talk in terms of the benefits of going this route and destroying the IRS. Often, that's enough to bring people on board.