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To: Dimples
The term is immaterial.
I believe the term is material. "Accumulating" is an additive process, "cascading" is a multiplicative process. A tax that accumulates adds up as the product goes from level to level but the effective tax rate on the base does not change because the tax isn't taxing the tax from previous levels. A cascading tax does tax the tax from previous levels (e.g., a sales tax is imposed on the manufacturer and again on the distributor) so the effective tax rate increases from level to level.
414 posted on 08/26/2005 1:16:09 PM PDT by Your Nightmare
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To: Your Nightmare
A difference without a distinction. With a Tax-revenue-neutral constraint (ie. the Feds collect the same amount of money from either tax scheme) it makes no difference whether you pay that tax a little bit at a time at each level or all at once at the end. The distribution of burden will change as some pay more and some pay less, but, in aggregate, the same tax is due at the end.

Folks here tend to throw terminology into a discussion rather loosely. Taxes in the current scheme both cascade and accumulate. Taxes in the FairTax do neither. In the end the same amount of tax dollars wind up in the Treasury. They just get there through different routes.

...the effective tax rate on the base does not change...

your point??? what do you mean by "base"?? ... the original dollar cost in the example? the taxpayer? great example of throwing in an undefined term.

Ultimately, extracting $2,000 Billion dollars from a $10,000 Billion economy requires levying an average transaction tax of 20%. If you tax less than the full base (base being defined as the total magnitude of all economic transactions -- GDP), you have to raise the rate. It doesn't matter, from the perspective of the total tax burden whether you pay it up front or in arears.

Having said that, there are secondary effects that may make one scheme preferable over others: growth impacts, ease of collections, transparency, distribution of burden, etc., but none of these are germine to this thread. The topic here is whether the FairTax can really raise your effective wages AND lower effective prices AND generate the same amount of tax revenue.

It can't.

420 posted on 08/26/2005 1:47:50 PM PDT by Dimples
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