Posted on 08/24/2005 9:40:44 PM PDT by RobFromGa
I contacted Dr. Dale Jorgenson, the Harvard economist who did the FairTax models, earlier today. He said that he assumed workers would keep their current after-tax income, NOT their current gross pay.
There is no pay raise with the FairTax plan, as many of us have stated, and been ridiculed for stating.
RobFromGa
Here is what I found out today. It backs up our contention that the FairTax Book is misrepresenting Dr. Jorgenson's testimony and report.
Pinging you to some detective work I have been working on today.
Dude, you have way too much time on your hands!
Dude, you have way too much time on your hands!
I happen to think it is important to make sure that this FairTax plan is accurately debated.
While I'm generally in favor of FairTax, I'm glad to see this post. I've always felt something didn't quite add up with this. I mean, if the government is taking in a certain amount of money via the current tax system, and after the FairTax they are still taking in the same amount of money, how can everyone be paying less taxes? You can alot a certain amount for the overhead that is eliminated, and you can also expect a certain amount of growth, but I don't think the proponents are counting on the growth in their models, and the elimination of the overhead doesn't account for all the benefits they are touting. It just doesn't add up.
He just can't do math.
ping!!
As I say at the end of the letter, this plan is still worth debating without the windfall pay increase for every wage earner. And there won't be any income or payroll taxes taken out of the new lower salary. And efficiences can cause the amount to rise back up later to everyone's benefit.
The point is that we need to discuss this plan honestly.
are you saying that Dr. Jorgenson can't do math?
It should have been a giveaway that everyone can't come out 25% plus ahead in purchasing power.
Our first editions might be a collector's item when they make the necessary revisions to the FairTax Book.
That depends entirely on how you are currently paid. My brother's business, for example, pays his employees as contracted labor at a set rate. He does this to limit mandates and red tape from the government being imposed on him. The individuals are responsible for their tax burden, and the Fair Tax would eliminate that burden from them.
I have my own concerns about how the monthly stipend the Fair Tax advocates would be abused by the class warfare crowd, but increased take home pay is possible for many.
I had done some quick calculations and couldn't get the embedded tax above about 9% (employer SS+Medicare + tax on profits) + costs of collection and no one could convince me that the cost of collection was up around 15%. That would have implied that the total cost of collection in the entire economy was around $1.5 trillion/year. It might be a lot, but not that much.
Even with this I still like the FairTax. I could accept an 18% net increase in prices to keep my gross paycheck and eliminate all income and payroll taxes.
Heinlein fan?
That won't work because it would screw people with accumulated wealth or on a fixed income. It also wouldn't help us be more competitive with foreigners.
The only workable approach is lower gross salaries, equal to what we take home now, with prices that remain the same for domestic goods.
"A more reasonable interpretation of my 1996 testimony is that workers would keep that after-tax pay; producers' prices would fall, but retail prices would be increased by the national retail sales tax. Any gains by workers and investors would be the result of increase economic efficiency."
I think I'm failing to see the problem here. A person's income is a rate agreed to between the employer and employee. The taxes that are taken out of the salary of the employee are taken out after it's been accounted to that employee. It's a cost to the company through labor costs, not an tax paid outside of the person's wages. To assume that an employee would still receive their current take home pay is to assume that the employee would receive a pay cut and/or that a person's wages are artificially inflated to take taxes into account.
With labor costs remaining the same, a company might not elect to drop their products prices. Heck, a company might just enjoy trying to reap a bigger profit margin by keeping their prices the same. That would increase the consumers' prices with the large sales tax added on.
The point of the fair tax to me is to wrest back some form of control from Congress regarding our money. While Congress will still try to spend, more people will be aware of just how much the fed takes from them. It might make people more responsible, especially in elections. The talk of wage increases, price drops, etc. are not unlike President Bush throwing out an exact dollar amount of how much an average family would save with his tax cuts, instead of giving people a more accurate percentage figure.
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