Posted on 08/18/2005 6:34:27 AM PDT by GPBurdell
NUMBER ONE ---- AGAIN!
The word came in yesterday afternoon. The FairTax Book will remain No. 1 on the New York Times Bestseller's List for the second week in a row. Our editor at Regan Books told us yesterday afternoon that it is much harder to make this list the second week than it is the first. Needless to say, we're excited and gratified. Interview requests for Congressman Linder and myself are pouring in, and the crowds at the book signings remain strong.
Our greatest hope is that the book generates a buzz and momentum of its own. Across the country people who have never heard of The FairTax before are learning that it is possible to get rid of all income and payroll taxes and replace those taxes with a one-time tax on consumption at the retail level. These people are learning that:
* They can say goodbye to the death tax, the gift tax, Social Security taxes, Medicare taxes, the Alternative Minimum Tax, capital gains taxes and the trouble of filling out tax forms; * That they can just go enjoy themselves on April 15th, just as they do on every other spring day; * That American corporations who have fled overseas to escape our crushing tax system can be brought home again; * That they can invest and save with no federal tax consequences whatsoever; * That the trillions of dollars that are working in offshore financial centers, again to escape our crushing taxes, can be brought back to work in the American economy again; * That we don't need to spend $500 billion a year to comply with an obscene tax code; * And that all of this can be accomplished while eliminating the federal tax burden on the poor, and without increasing the cost of living for everyone else.
I was discussing the book with some friends last night. I told them that over the past ten or so days I think that I have signed about 8,000 copies of the book at various book signings. Since many people buy multiple copies of the book, I would guess that I've seen about 6,500 people during that time. So .. how many people had something negative to say? Two. That's it. Just two. One man at Ft. Bragg came through the line twice to have two books signed (he went and bought an extra copy) all the while grumbling that we didn't include enough of the research in the book. Well, there's a reason for that. You can find the research at the FairTax website. Knock yourself out, pal. One other man stood in front of the table and demanded an opportunity to point out all of the typos he had found. We politely declined his incredible offer. But that's it. Two complaints. On the other hand, we've received hundreds of comments from people who doubted whether or not this idea could work ... until they read the book. Well, that's what we were after.
Again ... thanks so much for another week at No. 1! The FairTax is becoming an idea that can't be ignored.
The price drop is before the nrst is added. After nrst prices are about where they are today.
A price today includes taxes and tax costs. They are not identified on the receipt.
A price under the nrst includes taxes and tax costs. They are identified on receipts.
It is merely the timing of paying tax that changes. Now, some of the tax comes out of your paycheck before you see it. Under the nrst, no [federal income related] tax will come out of your paycheck. Instead, you will pay your federal taxes when you buy something.
What you pay for something will no longer include taxes and tax costs of producers related to the income tax - what you pay will instead include YOUR sales taxes.
The producers no longer have the same tax cost components in prices. The nrst doesn't tax business transactions.
So a producer's price can be less than now - and when the nrst is added, the final price to consumer is similar to today.
Competition takes care of the rest.You people always claim it's the other guy that's going to do it first...what makes you think I'm not the other guy?
Producers WILL be able to buy unfinished stuff for less - ie he will be able to purchase his materials for making a finished good for less. EG a farmer no longer has to charge as much for his corn since he no longer has to pay taxes on his income, his "contribution" to the payroll taxes of his workers etc...
So he can sell his corn to the miller for less.
Similarly, the miller can charge less for two reasons:
-he bought the corn from the farmer for less
-the miller no longer has to charge enough to pay his income taxes and the "contribution" to the payroll taxes of his workers etc...
and so on from farmer to miller to ... to the store.
When I buy a loaf of bread, the price including tax ends up being about what it is today (After all, today's price includes taxes and tax costs too).
The thing some say now is that's fine, but the farmer will have to have more money in his pocket b/c he has to pay tax on his loaf of bread - and they rely on this to reject the nrst. But as we see, his loaf of bread costs about the same as it costs today - so he will not need any more money. As it goes for loaves of bread, it goes for everything - in varying degress of price stability.
Dear Always Right,
"Saving 7.65% on labor costs to the business is nice, but that amounts to roughly $350 Billion."
In looking at my own payroll, if I don't give back the employer contribution to payroll taxes of 7.65%, most of my employees will be upside down. Most of my folks just don't pay anywhere near a total gross of 23% inclusive in federal income and payroll taxes on their total compensation packages.
I think the error for individuals who have never met a payroll is that they don't understand that there are compensation costs that are neither wages, nor taxes, nor compliance costs. The biggest one for us is health insurance premiums. Although the employee would hardly count the hundreds of dollars per month that go toward their health insurance premium that are "employer paid," nonetheless, when I calculate payroll budgets, they are certainly part of compensation. They amount to about 15% of my total payroll, and they are currently entirely untaxed.
The average family health insurance premium paid by my company is over $800 per month. The NSRT on that (currently untaxed) amount of hidden compensation will be $250, by itself. That's $3,000 per year.
Another big expense for us is that we reimburse a lot of educational and training costs. Under existing law, that's all tax-free. Again, it's part of my payroll budget. These costs aren't going away with an NSRT. No federal income or payroll taxes are currently paid on these compensation expenses. This further reduces the real tax rate that my workers are actually paying.
But under the NSRT, tax will be paid on these expenses.
Without giving the 7.65% employer-side of payroll taxes back to the worker, my workers would nearly all wind up upside down from this tax.
The bottom line is that someone with a salary of $50,000 per year may be receiving tax-free fringe benefits totaling another $10,000 - $15,000 per year. The 15.3% payroll tax (BOTH sides) of $7,650 really only amounts to around 11% of ACTUAL compensation, when one adds in employer-paid health insurance premiums, a little bit of employer-reimbursed education costs, and the employer side of payroll taxes (Remember that someone getting a nominal salary of $50,000 per year, even without benefits, is actually receiving, with the employer side of payroll taxes, $53,825.).
A mortgage, a couple of kids, and a non-working wife will bring the federal income tax liability for that $50,000 per year worker right down to a few thousand dollars per year. Based on total compensation (costs that do not go away with the NSRT), the TOTAL inclusive tax rate may not top 15% for a worker like this, and that's WITH the employer side of payroll tax thrown in.
These folks will see their after-tax costs of things go up dramatically, but without receiving both sides of the payroll tax, they won't see any significant rise in real take-home income (and in fact, in some cases, may see no rise at all, as the money they get back for payroll and income taxes gets chewed up in NSRT tax on their existing benefits.).
sitetest
I think you and I are in agreement about how this is expected to work. My only question at this point is why should the miller pay his workers the income tax that he had been withholding? After all, you expect that he will give back all of his income taxes to the company. So assuming that all of the prices were able to stay the same at the retail level, the miller would have the same amount as before and all of his workers would have their previous paychecks, plus all their FICA and income taxes.
Do you not see that this would be obviously unfair to the miller in comparison to his workers, and that he would correct such unfairness by reducing their wages, to get things back in balance.
That is exactly the point that a number of us have been trying to make, and you have made the point for us. If you don't realize that you are expecting the business owners to give up a disproportionate amount then I don't know what else anyone can say to help you understand.
Let's say the 23% is enough, so what. Business see less than 1/2 of the savings as Individuals pocket the lion's share of the eliminated income tax. Optimistically, I can drop my prices 12%, but then I have to charge a 30% tax (23% inclusive tax). A $100 item under the current system becomes a $114 under the sales tax. Which might be OK for people's who paycheck went up 15%, but for fixed income people forget it. The fair tax is not a free ride, but is being sold that way.
It's not impossible as long as you don't give the employers a big raise in take home pay. If the business keeps the income taxes that they are now paying workers, and the same for the business owner then there the prices of goods could go down substantially and the worker would take his same amount of pay that he gets now and he could buy about the same amount of stuff. Same for the owner of the business, he wouldn't need to make any more either to stay the same as before the FairTax.
A few simple things to ponder:
If prices on most goods are going to stay relatively the same, why should every wage earner in America get a 15.3 (FICA) + approx 10% (federal taxes) raise? Doesn't this make you wonder where this 25% increase in purchasing power is going to come from?
If prices are going to remain the same, shouldn't the worker be paid about what he gets now in takehome?
Nothing, and I am not even arguing that. What I am arguing is that the fair tax analysis is being sold as some fairytale outcome. People get to keep their all their paychecks and prices still fall. The pitch is based on pure fraud. I have demonstrated that over and over and over again. Until someone produces Jorganson's study with his methodology and with his definition of 'embedded taxes', you can't dispute it. What is so hard about getting Jorgansons's study???? Jorganson himself has said 'either' prices fall or employees take home goes up. But the fair tax sales's pitch depends on BOTH happening.
Another way to look at this,
if retail prices are going to be about the same with FairTax included, then purchasing power for a given dollar will be about the same.
if an employee is going to keep his income taxes and FICA taxes (the 100% promise) then this will be 20-25% pay raise for most wage earners, some as high as 30-35%.
Joe Sixpack was taking home $800 per week before, now he has $1000 because his income and FICA are no longer withheld. But all the prices are the same with the FairTax included. So, Joe and Jill Sixpack have an extra $200 a week purchasing power. Where did that money come from for 100 million American workers?
What do most people do when they get more money in their pay check....
Answer: They spend it.... They raise their standard of living...
I know what they'll do with it...
Where did it come from- Manna from heaven?
What they are and where they'll come from. Do you want to take a stab at explaining them? And don't include any current FICA or income taxes in your answer because those go to the wage earners.
Will a dollar be worth more or less than it is today in a FairTax world? (purchasing power on average) I've got $1000 in my pocket and I go to the mall, do I come back with more, less or the same amount of stuff as I can buy now?
Check out post #255
Why read it, I have read every argument on this subject over the last 6 years. Boortz book is just a watered down version of stuff that has been hashed over on this website hundreds of times over and he sources very little of anything. I want the real source of the information, like Jorganson's study that will define what he actually meant by 'embedded tax'. Boortx book doesn't do that.
Of course we will still have all of this under the FairTax. None of this is embedded tax costs. You have just described capitalism.
Compound that with whatever the Feds take out of your income tax, fica,
Under FairTax, this same money will be still paid by the business but it will go the employee instead of the FedGov.
and state.
State income taxes are not part of the FairTax and will not be eliminated.
Moreover, then add a sales tax.
These are local and state sales taxes, they are not going away with the FairTax.
By the time a customer makes a purchase this product has been heavily taxed. The Fair Tax eliminates all taxes except at the retail.
The FairTax didn't eliminate a single cost to the business that you described. Therefore the business is not able to reduce his prices.
This falls back to Reagan economics...
When people have more money to spend they spend it...
Then business make more money, hire more people, etc.... And those people start spending their money at other places and so on and so on....It is a ripple effect..
Will a dollar be worth more or less than it is today in a FairTax world? (purchasing power on average) I've got $1000 in my pocket and I go to the mall, do I come back with more, less or the same amount of stuff as I can buy now?
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