Posted on 09/08/2005 4:48:28 AM PDT by Your Nightmare
A bestseller advocating radical tax reform contains a critical flaw that misleads readers, according to a report in the October issue of MONEY Magazine.
...
While consumers would pay a federal sales tax on purchased items, the authors argue that prices at the store would stay the same. The reason: everyone involved in the process of production would no longer be paying taxes, so they could charge less for their goods and labor.
If true, that would mean a dramatic increase in Americans' purchasing power.
But, according to the MONEY report, the book fails to make clear that, in order for pre-tax prices to fall so sharply, companies would also have to cut wages they pay.
"Sure, you'd get to 'keep 100 percent of your paycheck,' as Boortz and Linder repeatedly write, but it would be a smaller paycheck," MONEY senior editor Pat Regnier writes. "That's kind of a big thing to leave out."
(Excerpt) Read more at money.cnn.com ...
But any productive person who has managed to acquire some savings will be subject to an immediate and significant tax burden on their savings. It is highway robbery! Include in any "Fair Tax" bill, offsetting compensation for individuals current after tax savings, and I'll support it. Without that provision, it is theft from any in that class, and I would not support it.
You need to look more closely - and think more carefully.
I don't know where you got the "28%" figure, but whether or not you pay a sales tax depends upon how you purchase the home. If you purchase a "used" home it isn't taxed at all and in addition any money you make as investment income is not taxed under the FairTax so you'd be wise to invest some. So by a fairly modest change of plans, you could do quite well under the FairTax.
With the present system on the other hand with any money saved you not only pay income tax on certain types of savings, but, when spent, you also pay what amount to a tax in the form of cascading embedded tax costs in everything you buy in the form of higher prices. This "tax" is not optional under the present system and applies to all you spend and is in addition to any "regular" income tax you may have paid.
In the Fair Tax plan, this tax treatment would go away - I trade my house in, I get socked with a 28% tax, just for trading my house for one in a different clime, etc.
Actually not true, as any residential property that, one lives in rather than use for business purpose, held as such before implementation of the FairTax act is grandfathered. The tax is not collected on its resale to another individual.
If such a property is coverted to business use by its owner or in the process of sale to a business for business purpose, the owner receives tax credits for that amount of the home that is used in the business, thus not taxed again in fact prior tax is rebated at the FairTax rate * market value.
If I do a reverse maortgage to support myself in my old age, as I spend, I get taxed at 28%, on already taxed savings.
Since this constitutes a sale of your residential property to a business, you receive credit as above, thus you are made whole as regards taxes on such property. Heck you don't even have the tax rates right so why are you making stuff up here?
Seems to be the tax exclusive rate for the quoted "23%" tax inclusive rate. Something we poor saps are familiar with: you know like 6% sales tax, (tax exclusive) etc. If you purchase a "used" home it isn't taxed at all
Its price would be comparable to a similar "new" home that was taxed.
any money you make as investment income is not taxed under the FairTax so you'd be wise to invest some.
If you did not spend it. That is if you got your thrills from seeing a larger and larger figure on your investment statement, rather than using the money. Whats that?
Its price would rise to that comparable to a "new" house that was taxed. (Or the comparable "new" house price would fall). It does not matter whether a tax is collected on it or not.
Really, Nightie - let's see your figures that show that.
The tax is not collected on its resale to another individual.
Its price would rise to that comparable to a "new" house that was taxed. (Or the comparable "new" house price would fall). It does not matter whether a tax is collected on it or not.
In which case you would still be made whole as the seller, by receiving the full amount ( market of equivalent new with tax).
What you miss in this is that in the scenario you suggest, it is not government receiving a tax, it is you the owner/seller receiving the fair market value including amounts equivalent to the tax in a newsale situation.
Hence your entire scenario of a loss due to double taxation of a resale residence disappears entirely.
... and to think you answered it WRONG.
It may even be that you'd get not only get the employee portion of withholding (the $1,000 figure) but possibly also the employer's portion ($1,080).
Not only that, but prices would not increase as stated but would actually decrease due to the removal of embedded tax costs which includes business income taxes and compliance costs.
That is if you got your thrills from seeing a larger and larger figure on your investment statement, rather than using the moneyI do get a thrill seeing a "larger and larger" figure on my investment statement (woohoo). If I see a smaller amount, I'm not thrilled at all.
Geeez, you are one stupid SOB. Until you have something intelligent to say, don't ping me.
You miss what many people do in that everything your mother spends now (when she "pays no income tax" in your words) she is actually paying what amounts to a hidden tax on everything she buys in the form of higher prices boosted by the effects of business income taxes and compliance costs.
This is not an optional tax and the buyer of things presently cannot escape from it whereas with the FairTax you mother could probably with judicious purchases of used things instead of new taxable things do quite a bit better with the FairTax where the consumer controls when and whether he pays taxes.
Let's see your facts and figures for such a statement, my man.
You SQLers can't even get your stories straight with each other.
You SQL maroons keep ignoring business income taxes and try to pretend that only Subchapter C corporations pay taxes ... tain't so. You need to revamp your figures.
That sort of thing is very much harder with the FairTax since any change in rate or application affects all taxpayers and cannot be hidden as at present.
That's just a reporter's hitpiece and certainly not research. Not even close.
And the Nightmare Tax (which doesn't exist) still has payroll withholdings, tax costs embedded in prices, no help in the exporting of tax costs in prices of exported goods, and no help in gaining tax revenue from the illegal economy.
And, oh yeah, it still leaves us with an income tax and the IRS. Great idea.
Your equation:
"State sales tax + local sales tax + city sales tax + price TIMES the 0.30 fairtax rate"
should read
Total price = ((Price * 1.30) * 1.07 (State and local sales tax)
A $77.00 item would be ((77.00*1.30) *1.07) $107.00.
We all start receiving monthly prebates equal to the amount of Consumption tax we would be expected to pay on life's basic necessities. This sounds pretty good. Of course, we know that it isn't nearly as big a gift as it seems because we'll have to pay some of it back in taxes when we buy things at the store, right? ....
He assume ths prebate to be additional income and says it is not as good as it sounds because some of the prebate will be spent on the sales tax. He obviously doesn't understand what the prebate is, that it is all assumed to be spent on the sales taxes to offset them. This basic error is a clear indicator he doesn't understand what he is critiquing, as is true of most of the dissenters on these threads.
It may even be that you'd get not only get the employee portion of withholding (the $1,000 figure) but possibly also the employer's portion ($1,080).And it may even NOT be, but nice try at your incessant attempts at your deceptions. This is the first mention by a fairtaxer of the employer portion going to the employee, it in fact is contrary to anything you'd find at AFT about employer half of payroll taxes...
The employee portion of withholding was $250 not $1000 and the employer's portion was $80, not $1080...
The government would still need and extract the same $330.00 no matter what prices do or what wages do...
Given the $1,000 take home, that equates to a, not 23%, not 29.97%, not 33%, but a 49% sales tax rate in the first year after the 23% 30% teaser rate because SS bureaucrats would be obligated to 15.3% of the SS wage base including self-empoyment income... The fairtax is "revenue neutral", remember?
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