[SolidSupplySide]

However neither Federal revenues, nor the FairTax is 23% of GDP.

This is true. In recent years, federal revenues have be 21% of GDP.

See table 4

This is the amount that the FairTax is intended to generate. It is a little less than the 23% rate due to the quirky rebate scheme. (The rebate scheme serves no economic purpose. It exists only to make the rate progressive.)

Notice that in recent years that the federal share of GDP has decreased. That is the result of the Bush tax cuts. We are getting more revenue on a lower percentage because the economy has grown. FairTax proponents have not adjusted their claim to 21% of GDP. In effect, the adoption of the FairTax would be a tax increase over today's rates.

[ancient_geezer]

Notice that in recent years that the federal share of GDP has decreased. That is the result of the Bush tax cuts. We are getting more revenue on a lower percentage because the economy has grown. FairTax proponents have not adjusted their claim to 21% of GDP. In effect, the adoption of the FairTax would be a tax increase over today's rates.

 

As the bill stands at present, you are correct. As the true revenue neutral rate should be closer to 19% taking the Bush tax cuts into account. Howerver, since the Bush tax cuts have not been made permenant and they all expire by 2010 the bill has not been adjusted for obvious reasons.

I would suggest you get on the ball and make sure those tax cuts are made permanent. To do so will drop the FairTax rate considerably.

 

The 23% rate is based on pre-1999 tax and NIPA/GDP data when the legislation was first introduced, refer to the CATO's description of Calculating the Tax Rate.

A more current calculation based on current tax law (Bush tax cuts in effect 2003) is provided below:

 

http://www.fairtaxvolunteer.org/smart/tax_system.html

 

Table two: national FairTax rate calculation: 2003
Line	Description	FairTax base	Source
	Taxable item	Billions
1	Personal consumption expenditures	$ 7,760.9	NIPA Table 1.1.5, line 2
2	Purchases of new single-family homes	$ 310.6	NIPA Table 5.3.5, line 20
3	Purchases of new mobile homes	$ 7.1	NIPA Table 5.4.5B, line 40
4	Improvements to single-family homes	$ 132.0	NIPA Table 5.4.5B, line 42
5	Less: imputed rent on owner-occupied housing	$ 859.6	NIPA Table 7.4.5, line 3
6	Less: imputed rent on farm housing	$ 11.9	NIPA Table 7.4.5, line 5
7	Additional financial intermediation services	$ 83.1	Financial & risk Intermediation greater than NIPA definition
8	Foreign travel by U.S. residents	$ 39.6	One half of NIPA Table 2.5.5, line 110
9	Less: expenditures abroad by U.S. residents	$ 6.6	NIPA Table 2.5.5, line 111
10	Less: food produced and consumed on farms	$ 0.5	NIPA Table 2.5.5, line 6
11	State and local government consumption	$ 1,058.5	NIPA Table 3.10.5, line 47
12	Gross purchases of new structures	$ 213.4	NIPA Table 3.9.5, line 24
13	Gross purchases of equipment	$ 51.5	NIPA Table 3.9.5, line 25
14	Federal government consumption	$ 658.6	NIPA Table 3.10.5, line 12
15	Gross purchases of new structures	$ 15.5	NIPA Table 3.9.5, line 9
16	Gross purchases of equipment and software	$ 78.1	NIPA Table 3.9.5, line 10
17	Less: state and local government sales taxes	$ 343.9	NIPA Table 3.3, line 7
18	Less: government education expenditures	$ 414.7	Table 255, SAOUS 2003
19	Less: private education expenditures	$ 151.7	NIPA Table 2.5.5, lines 105 & 106
20	Expenditures in U.S. by non-residents	$ 86.7	NIPA Table 2.5.5, lines 112
21	Travel to U.S. by non-residents	$ 33.3	One half, SAOUS 2003 Table 1280
22	National retail sales tax base	$ 8,740.0
Revenues to be replaced
23	Income tax	$ 927.7	Dept. of Treasury; derived from Table B-81 ERP 2004
24	Estate and gift tax	$ 22.4	Dept. of Treasury; derived from Table B-81 ERP 2004
25	Payroll taxes	$ 717.8	Dept. of Treasury; derived from Table B-81 ERP 2004
26	Excise taxes	$ -
27	Total	$ 1,667.9
Revenue-neutral rate calculation
28	Tax exclusive rate (no rebate)	19.1%
29	Tax inclusive rate (no rebate)	15.9%
30	Base reduction equivalent for rebate	$ 1,746.1	Total consumption allowance for 109 million rebate units
31	Net tax base	$ 6,993.8
32	Tax exclusive rate (with rebate)	23.8%
33	Tax inclusive rate (with rebate)	19.3%