You know that might be the first explaination from a fair taxer that makes sense. Gale may be wrong. I assumed Gail was correct because there were no factors in the calculation for evasion, but if NIPA numbers don't include any of the evasion economy, your tax base has effectively been reduced by the current tax evasion rate. That was one point I was unsure about, but trusted Gale's opinion. I still however believe that a 29.870129% sales tax will lead to more evasion especially in the service sector. I am very confident your numbers can only work if employees take a pay cut.
At least your got the t-e number straightened out but you still only need two decimal places.
And, no, the employees won't be taking pay cuts.
but if NIPA numbers don't include any of the evasion economy, your tax base has effectively been reduced by the current tax evasion rate.
GDP, GNP, NNP none of it contains any attempt to guess at non-reported activity of teh underground economy or of illegal trade of any form.
An explaination of what the NIPA GDP data series measures can be found here:
The NIPA keyword index of what is included and where in the tables each item can be found is here:
I still however believe that a 29.870129% sales tax will lead to more evasion especially in the service sector.
I suspect you would have a hard time establishing that seeing as the dominant portion of the tax evasion today is in that same service sector among small business & self-employed types.
The studies I have seen at even high rates of taxation in the EU, the dominant reason for small buisinesses and single-propriators dropping out into black market operations and cash economy is more a function of complexity of the tax system acting as a barrier to entry and plain disgust with it more than rate of tax levied. Among countries with the same sale tax rates in the 15-20% range there is a wide variation in evasion rates directly related to the amount of regulatory burden imposed with the business tax system/s in existence.
I am very confident your numbers can only work if employees take a pay cut.
Which numbers, the tax rate calculations or figuring the lower producer pricing in a taxfree manufacturing environment.
I assumed Gail was correct because there were no factors in the calculation for evasion, but if NIPA numbers don't include any of the evasion economy, your tax base has effectively been reduced by the current tax evasion rate.The NIPA personal expenditures numbers (the base for the FairTax) factor in current sales tax evasion/avoidance. The income numbers (the base for the current system) have the current income/payroll tax evasion/avoidance. It doesn't take a brain surgeon to realize that if the sales tax rate goes from ~7% to ~37% that sales tax avoidance/evasion will increase from the current level.