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A Fair Question about Fair Tax
August 3, 2005 | RobFromGa

Posted on 08/03/2005 4:51:43 PM PDT by RobFromGa

A simple question...

So, under the FairTaxI get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month. And businesses pay no taxes.

Where is the extra money coming from...

What is wrong with this reasoning below?

1. Right now the government collects $X in the form of all taxes.

2. All taxes are really paid for by consumers in the end result, either directly, or in the cost of their purchases which allow businesses to collect money in order to pay taxes. Companies do not really pay taxes they jsut collect them and pass them on.

3. The FairTax will collect the same $X per year in the form of taxes but using a different method.

4. Under the FairTax, the price paid for goods will not rise because getting rid of all the taxes built into goods will cause the prices to drop, then the FairTax will add onto the new lower price, resulting in the same price paid by consumers.

5. So, for a given taxpayer, shopping (consumption) will be revenue neutral. Ie. Prices are the same as before.

6. And each given taxpayer will get a "prebate" check every month that they are not getting now.

7. And each taxpayer will pay no taxes on capital gains, or on savings.

8. And, each taxpayer will no longer pay any taxes on income, or payroll taxes.

9. And, there will be no Fair Taxes on any purchases made for a business.

Are these all true so far?

Again, I get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month.

Where is the extra money coming from???


TOPICS: Your Opinion/Questions
KEYWORDS: doubledippers; fairtax; irs; scientology; smokeandmirrors; snakeoil; taxfraud; taxreform
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To: RobFromGa; pigdog
I don't make a product I sell a product that others make and get a commission when I sell something. So I have no real cost of goods sold.

Unless you are losing money on your business now, I'd say the Fair Tax would be absolutly GREAT for you. Think of it. You will pay 23% on your expenses, but avoid the 15%+ in self-employment taxes (SS & Medicare) while also ending income taxes that are taking about 30% of your net revenue. I'd guess you would come out 25-30% ahead of where you are now. You would also likely be collecting a fee (1/2% ???) on the taxable sales you make. Pigdog probably could give you more information.

361 posted on 08/04/2005 1:03:49 PM PDT by Ditto ( No trees were killed in sending this message, but billions of electrons were inconvenienced.)
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To: RobFromGa
I think I understand your question now. Another way to put it would be, if there is enough tax costs in the products we buy to fund the federal government, why the heck am I paying income taxes, too? Let me try to explain.

The Fair Tax rate is not derived from the amount of the embedded taxes included in the prices of goods and services we buy. The fact that they are about the same percentage is a coincidence. The Fair Tax rate is calculated as follows, per this article http://www.fairtaxvolunteer.org/smart/tax_system.html See table 2 at the very bottom:

The tax revenues collected in 2003 (dollars in billions)were income (personal and corporate) $927.7, Estate and gift $22.4, Payroll $717.8, for a total of $1,667.9 (that's trillion for all you mathematically challenged).

The Fair Tax consumption base starts at $7,760.9 in 2003 and then is adjusted with a bunch of items until you get to $8,740. Then the base is adjusted for the prebate in the amount of $1,746.1 to bring the base down to $6993.8. That makes the tax inclusive rate 19.3%, or 23.8% exclusive. The bill's tax inclusive rate is 23%. That doesn't mean that the embedded taxes included in prices is now 19%.

To recap, the fact that the embedded taxes on average are approximately 23% and the Fair Tax rate in the bill is 23% is coincidence. For one thing, the current tax base and the Fair Tax base are not the same, and part of the cost is compliance costs.

One interesting note, The tax base for the purchase of new single-family homes is $310.6. That means that if these were excluded the exclusive tax rate would increase from 23.8% to 25%. That isn't too much, but if we exclude that, why not exclude lawyer fees?

362 posted on 08/04/2005 1:05:29 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: Ditto
You will pay 23% on your expenses

Not according to HR25, I won't. I'd say the Fair Tax would be absolutly GREAT for you

From what I've seen, it would be absolutely GREAT for everyone, that's what scares me.

363 posted on 08/04/2005 1:06:43 PM PDT by RobFromGa (This tagline is on August recess...)
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To: RobFromGa

I don't itemize now because my home mortgage interest deduction is not as much as it once was.


364 posted on 08/04/2005 1:07:11 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: rwrcpa1
I thought you weren't going to buy the book? You didn't want to give Boortz any of your money. Or did you just do it the cheap way and let somebody else buy it and read their copy.
I bought it. I'll just put a fake Boortz signature in it and sell it for a profit on eBay. :)


Or did your buddies on K-Street give you a copy?
I can honestly say I know no one who works on K-street.
365 posted on 08/04/2005 1:07:34 PM PDT by Your Nightmare (The FairTax. The first tax plan with Fanboys.)
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To: RobFromGa

She wouldn't have to be rich to be evil.


366 posted on 08/04/2005 1:08:18 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: rwrcpa1
Bogus.
Let's see a quote from an economist who says consumer prices stay the same while take home pay goes up.
367 posted on 08/04/2005 1:09:21 PM PDT by Your Nightmare (The FairTax. The first tax plan with Fanboys.)
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To: rwrcpa1
If I'm understanding your numbers correctly, you are saying that all of these taxes add up to x dollars, so that is all that can come out of the costs. The thing you fail to realize (or do but won't ever admit it) is that when materials and labor come up through the supply chain each companies tax costs get added on to the costs of the previous company. It comes up in multiples, not just one static number. BWAAAAAHHAHAHAHAHAHAH

Wow, are you just a moron or something?

They are not my numbers, they are from Bush's Office of Management and Budget. They show the total taxes collected that would be eliminated from the price of all goods and services in the US.

Guess what? They don't add up to 20% embedded taxes. They don't even add up to 7% embedded taxes.

368 posted on 08/04/2005 1:11:55 PM PDT by balrog666 (A myth by any other name is still inane.)
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To: maui_hawaii

The drug dealers can get the rebate IF they register for it and have a valid social security number. Will they register? Who knows.


369 posted on 08/04/2005 1:12:04 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: RobFromGa

"Small businesses like S-corps and proprietorships don't pay any taxes now. THey collect income, write off salaries and business expenses and the owners pay income taxes on what is left over.

Business expenses are not taxed under HR25, see post 316. So this is a moot point except for the question of whether or not all the compliance costs will still remain in place to ensure that businesses are now complying with the FairTax code. We get rid of the IRS and replace it with 50 State revenue collectors each with the power to audit?"

Have you ever been through a sales tax audit? I have. I haven't been through an income tax audit, but I know enough about them to know that they are exponentially more difficult to endure than a sales tax audit. The sales tax audit was for a small software company. They sent in one auditor - he was in by 9, out by lunchtime. I dare say that an income tax audit for that same company would have required more than one auditor (which means more than one set of documents being requested) and they would NOT have been out by lunchtime. It would have taken a couple or three days, probably. So equating an income tax audit with a sales tax audit is not apples to apples to begin with.

Second, it is a NATIONAL Retail Sales Tax administered by the states. A business with locations within a single state would remit its NRST through that state. Even businesses with multiple state locations could probably elect to consolidate their return for all locations through a single state - the one their HQ was located in. Even if they didn't do that, there would still be only one state that any single location would have to deal with. I think you are getting this confused with state sales taxes, where any state you sell into would have the right to audit. There wouldn't be any need for that, because you would not have the myriad of state differences to deal with.


370 posted on 08/04/2005 1:14:53 PM PDT by phil_will1 (My posts are in no way limited or restricted by previously expressed SQL opinions)
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To: wardaddy
I agree we need to overhaul the tax code but what you propose would hurt folks like me worse than what I deal with now. What about interest and depreciation as costs?

Uh, you wouldn't be filing a tax return, so there is nothing to deduct depreciation or interest from! Businesses will no longer file income tax returns, included self-employeds, partnerships, LLCs, estates, trusts, corporations, etc. Am I missing something from your question?

371 posted on 08/04/2005 1:15:00 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: pigdog; RobFromGa
Be aware, RobFromGa, that the poster we know as Nightie is a virulent opponent doing nothing but attacking the FairTax and/or supporters at everry opportunity.
RobFromGa, I'm sure you will recognize this as an ad hominem attack. They can't address the message so they go after the messenger.


As to Nightie's post #61 he points you to, it has been, verbatim, posted by him several times on these threads - and refuted just as many times.
Actually, they've never been refuted. So, pigdog, can you show me one quote from an economist that says consumer prices will stay level while our nominal wages stay the same (take home goes up)? One?
372 posted on 08/04/2005 1:15:01 PM PDT by Your Nightmare (The FairTax. The first tax plan with Fanboys.)
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To: upchuck

Boortz's point was correct enough (and he was also right about the prebate) but not responsive to the caller's concern as you point out.

Since the caller was using already-taxed money he was concerned about paying what he views as another tax on that money (whether it's for cheaper priced things or not) and yes, he would pay the sales tax - assuming certain other things were true. Used goods are not taxed, for example, and a given consumer can in effect lower the taxes he pays by judicious use of used goods (many people buy used cars and used houses right now).

Also, and a major point the caller is missing is that when he spends his $600,000 - or some part of it - under the income tax system he is effectively taxed by having the prices of goods inflated by embedded tax costs (e.g., he pays quite a bit higher prices partly caused by embedded tax costs) - which may have been what Boortz was driving at.

The caller is taxed again (when his money currently spent) by these hidden taxes (as some call them) but he is seldom aware of it since they are, after all hidden (but they are there). In addition, the caller could invest this money (or some part of it) earning even more and be judicious in consumption and do quite well.


373 posted on 08/04/2005 1:15:10 PM PDT by pigdog
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To: Huck

Because as conservatives we believe in free trade, remember?


374 posted on 08/04/2005 1:16:39 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: phil_will1
Whoa!! YN got body slammed. No wonder he wants you off the threads.
LOL! You guys crack me up. That wasn't a body slam. You want to see a body slam?
375 posted on 08/04/2005 1:17:55 PM PDT by Your Nightmare (The FairTax. The first tax plan with Fanboys.)
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To: DakotaRed

Read this article about how the states could replace their taxes with the Fair Tax base and rebates: http://www.fairtaxvolunteer.org/smart/tax_system.html


376 posted on 08/04/2005 1:18:17 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: n-tres-ted

That is correct. If it is invested, it stays in investment tax free. Until the no good heirs spend it, of course. LOL


377 posted on 08/04/2005 1:19:31 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: RobFromGa

At least the pimped out drug dealer will be paying taxes. He is still a lawbreaker but at least he's not a tax law breaker.


378 posted on 08/04/2005 1:20:47 PM PDT by rwrcpa1 (April 15. Let's make it just another day.)
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To: rwrcpa1

Only 160 more posts to go and you will be in real-time. Read faster :-)


379 posted on 08/04/2005 1:23:12 PM PDT by RobFromGa (This tagline is on August recess...)
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To: rwrcpa1; maui_hawaii
The drug dealers can get the rebate IF they register for it and have a valid social security number. Will they register? Who knows.
Why wouldn't they? It's free money. I'm sure some of them will figure out a way to register twice.
380 posted on 08/04/2005 1:25:10 PM PDT by Your Nightmare (The FairTax. The first tax plan with Fanboys.)
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