Posted on 05/14/2006 1:59:13 PM PDT by RobFromGa
FAIRTAX: A Primer Now that the author of the bill, John Linder, admits in his co-authored book "The FairTax Book" that there in no such thing as "Keep 100% of your paycheck, while prices stay the same", let's examine where that leaves the FairTax:
WAGES: It has been made clear by many proponents of the FairTax that they are expecting 100% of their current gross pay, and that many employer/employee wage relationships, including those for government workers are controlled by contract. So, we'll assume every wage earner gets to keep 100% of their current gross pay. Everyone can figure out for him or herself what that gives them in terms of a take-home pay increase.
BUSINESS COSTS: If we assume that businesses get to keep their half of the payroll taxes (7.65% of all payroll costs up to first $95k per employee), plus taxes on corporate profits (average <2% of Cost of Goods sold) and some tax compliance savings (being generous we'll call this 1% savings), this gives the business about 8% of cost savings with which to potentially reduce prices.
PRICES: For domestic goods, if we assume that the entire 8% is passed along to the consumer, this means that pre-tax prices will be 92% of present day prices. That $10 twelve pack will now be $9.20. Of course, the twelve pack of imported beer is still $10 pre-tax. Once the 30% FairTax is added, the price of the domestic beer will be $11.96 and the price of the imported beer will be $13.00 even. So, domestic prices will go up about 20% and imported item prices will go up about 30%.
GOVERNMENT EXPENSES: Since the government expects this plan to enable them to purchase the same things they purchase now, they will need to raise sufficient revenue in order to achieve purchasing power parity. Since they will be paying the 30% FairTax on every item, we can assume that for stuff they buy, they will see the same 20% price increase on domestic items and 30% increase on imported items as other end consumers. So they will need to increase their dollar intake by this 20%+ to enable them to buy the same amount of stuff. And, of course all government salaries will have the 30% FairTax paid on the salary, less the employer half of the payroll taxes, so this is a net 22.35% increase in the cost of the entire payroll of the US government (and states too, but that is another can of worms).
ENTITLEMENT COSTS: Since the social security payments are linked to CPI, when this 20%+ price rise slams through the economy all the social security checks will have to be raised to cover this massive FairTax caused inflation. They will rise by at least 20%, and a litle more because the basket of goods will include some imported items like oil. Medicare/medical expenses will have the FairTax added, for a 20%+ increase.
GOVERNMENT PURCHASING POWER PARITY: with the cost of Payroll, plus everything they buy, plus the entitlements, all going up 20% plus we can assume that the governement will need to collect approximately 20%+ more of the new inflated dollars in order to buy what they are today with today's more stable dollars.
FAIR TAX RATE: Assuming nothing else changes regarding purchasing behavior, size of the government, etc. this means that the 30% FairTax would need to immediately raised 20% (to 36%) just to bring in all the inflated dollars that are required to fund the govt at present level. The price of domestic beer is now $12.50 and the import is $13.60.
SAVED MONEY: All dollars that are post-tax savings would be devalued by the FairTax inflation by 20% in terms of what they can buy with their hard-earned and saved money.
Does this sound like a utoia to anyone? Isn't it very likely that a 36% sales tax will cause consumption to suffer and/or transactions driven into a barter system or the black market where they cannot be taxed. And every dollar that is taken from the legitimate economy is another increase that is needed in the FairTax rate in order to feed the government the amount of money it needs.
Isn't is likely that we will end up with an income tax again on top of the FairTax when this all plays out?
ftp://ftp.bls.gov/pub/special.requests/ce/standard/2001/income.txt
that may help you
It's no secret... it's because the existing tax system discourages saving money and encourages spending it.There's no proof of that.
The Fairtax by your/it's own admission lowers interest rates. Where's the "saving" incentive in even lower interest rates?...Oh wait I know, (I'm supposed to think) I'll have more money to save at an even lower rate than before WOW!
And, what is saved money for, count, look at?
And, if you're admitting the Fairtax discourages spending how is that good for the economy?
And, if spending is dicouraged what would happen to the rate? IOW, what's the point of the "sales tax" if your goal is to discourage "sales"?
Fairtaxers lack any logic.
The prebate, as I understand it, is intended to be a refund of the sales taxes a family is assumed to be paying on the basic necessities of life. How is this refund any more evil than the one I got in April?Was your refund in April based on assumptions?...That's how.
So I guess we are in agreement that prices are going up substantially if the FairTax were to pass?
... but, except for one pig-headed holdout, it looks like most agree.
What country are you from ???
96.4% of income taxes are paid by 50% of the people. The other 3.6% of the Federal tab is picked up by the other half. 35% of the tab is picked up by the top 10%. How does that constitute a super-majority that gets hit hardest ?
I'd never attempt to promote the notion that the "fair tax" plan is perfection. However, it's a damn sight better than what we have now, and it's about the only plan that "is" better that has a realistic chance of being implemented.
Obviously he's not the only one ... check #242.
Sorry guys, most who understand the FairTax realize you're merely blowing smoke abd don't agree with anything so silly. There'll be no "substantial price increase" at all.
Disposable personal income will remain where it is or - more likely - go up somewhat. With all the income tax effects taken out of prices it can hardly be otherwise despite your misinformation.
And the SQLers lack any truth.
Naw - the Nat'l Retail Federation is pitiful. Read the rebuttal to their so-called "study" on the FairTax website ... and stop posting such garbage.
States and localities pay the FairTax (which is more likely a 19% t-i rateEven if 19% vs 23% was true which it "more likely" isn't, is a new (HIDDEN) 19% tax on states and localities (That would be us, but you're too dishonest to admit that) supposed to make us all stand and cheer for the Fairtax?...we're not all lunatics too.
Okay, so the fact that the amount that's being 'prebated' isn't exactly what I would be taxed on basics that's irritating you?No, the entitlement mentality irrtates me.
So, one month I might get back $10 more than I would if someone audited all my receipts, and the next month I might get back $15 less than what I actually pay.Actually you get the same amount every month based on your family size whether you spend any money or not...you know, like a welfare check.
Why not increase the (GAG!) prebate and eliminate the tax on everything? For this we should condemn ourselves to a progressive income tax system
FAQ #48
Is the Fairtax progressive?
Do the rich pay more and the poor pay less as a percentage of their spending? Absolutely, as you can see in Figure 6 below – where the graph shows annual expenditures for a family of four and the corresponding FairTax effective tax rates. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the rebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.So I guess socialism is OK as long as you beleive you're getting your share...or more
The states are taxed now Looey and the subset (you do know what that means, don't you?) of W&S employees affected is actually pretty small IAE.
There's nothing hidden about such a tax nor is it hidden by being embedded in prices as at present.
Ah, but Looey - it's not "socialism" or anything like it. Nor is it an entitlement but a refund of part of your taxes paid so it certainly is nothing like "your welfare check".
And so you miss the obvious point that to increase the prebate the FairTax rate must be raised ... and that means raising it for everyone. Your GAGing must have blinded you to the truth.
Sorry, scamal, the VAT taxes were not (and still aren't) at all like a true tax on end consumption such as the FairTax. They are quite different and almost all of them also have other big taxes hooked on.
You must mean "trust the IRS; they know what the tax laws are AND what's good for you".
Read #276 again, and reply when your brain is actually turned on.
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