[lewislynn]

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

Yea, there aren't many people employed by or retired from local, state and federal governments...An additional, new 30% tax ON their wages salaries and benefits wouldn't amount to that much at all. < /sarcasm >

[Dimples]

If you'd like to put some numbers on that, in 2003, States and Localities spent $1,323 Billion on Consumption, Compensation New Structures and Equipment. Of that total, Compensation was $795 Billion. Of Compensation spending, $37 Billion was the ER portion of payroll tax.

After adjustments, $914 Billion would be taxable under the FairTax. Of that, $501 Billion would be taxable Compensation.

Total FairTax due on that spending at 19.3% (inclusive) is $214 Billion of which $79 Billion could be paid by cost reductions (repealed FICA tax, pre-tax cost reductions) for a net Deficit of $135 Billion. Of the total FairTax due, $119 Billion is due to Taxable Compensation alone (as compared to the $37 Billion paid today as ER payroll tax.)

If States and localities reduce spending to balance the budget, the Federal government doesn't collect enough FairTax to be revenue neutral.

Otherwise State and Localities will have to raise their taxes by 10% to 12% to make up the difference.

[pigdog]

Well, actually, Looey, it is not the employees that are pay the tax. they get a large boost in takehome due to the FairTax and prebate. The state will have to pay a FairTax portion on a small subset of its employees