[jonestown]

The Fair Tax proposal is written in english..
We should be able to agree on the actual tax rate proposed on a $100 purchase.

Is it 23% ? Or -- 29.86% ?
807 jones

The appropriate rate depends on what you intend to accomplish.

It is either one or the other, on a sales receipt. The line would read:
Federal Tax - 23%
or
Federal Tax - 29.86%

Basically the Tax inclusive rate (23%) is specified in the Fair Tax Act to enable comparison with the tax systems (income and payroll) it replaces which use tax inclusive rates and is the rate a seller would apply to his sales receipts in a federal tax only situatation to calculate the tax to be remitted to tax agencies.

I don't care. All that matters is if the tax is 23% or 29.86% .

The two different rates are for the same amount of tax, but different methods of calculation based on price or total payment.

Same amount? That cannot be.
On a $100 purchase the tax paid would vary by $6.86 --- Can you explain further?

[OHelix]

A receipt would read:

$100 item
$29.87 tax
$129.87 total

29.87 is 23% of 129.87

If you earned 129.87 and 23% income tax was levied on it, you would have $100 after tax. Thus a 29.87% sales tax is the same as a 23% income tax. One is the inclusinve rate, the other is exclusive rate, but they are the same amount.

To compare it to most state sales taxes, you would use the 29.87% rate. To compare it to Federal income and payroll taxes, you would use the 23% rate.

[ancient_geezer]

Same amount? That cannot be.
On a $100 purchase the tax paid would vary by $6.86 --- Can you explain further?

 

Under tax inclusive the total payment is used to calcualte tax paid out of the payment tendered.

For $100 tendered in payment

tax = 0.23*$100 = $23
price = $77

Under tax exclusive calculation, price is is used to calculate to the tax to be added to determine the total payment to be rendered.

price = $77
tax = 0.2987*$77 = $23

payment = $23+$77 = $100 paid.

 

The difference is for example like the difference in calculating odds of a gaming event vs calculating the propbability of an event happening.

The odds calcualition represents a ration of one happening to another.

The probablility calculation represents the fraction of the total.

The tax inclusive calculation is a fraction of payment rendered. Out of a bucket with 23 green marbles and 77 red marbles, 23% of them are green.