[Your Nightmare]

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due on that spending at 19.3% (inclusive) is $214 Billion of which $79 Billion could be paid by cost reductions (repealed FICA tax, pre-tax cost reductions) for a net Deficit of $135 Billion.

According to the AFT's own "revenue neutral" calculation for 2003, states would pay $271 billion in FairTax.

 $ 1,058.5  state and local government consumption
  +  213.4  gross purchases of new structures, state/local
  +   51.5  gross purchases of equipment
  -  414.7  government education expenditures
------------------------------------------------------------
   $ 908.7 billion
    x 29.87%
------------------------------------------------------------
    $271.4 billion in FairTax

Of course, in typical AFT fashion, there is an error - and it just happens to be in their favor [gasp]. They subtract all of government education spending when only the wages of "employees directly providing education and training" wouldn't be taxable. Everything else would be (e.g., books, supplies, administration, etc.).

The Statistical Abstract of the U.S. shows teachers' salaries for 2003 were ~$140 billion. Make this adjustment and the state and local governments would be paying $353.7 billion in FairTax. Which is right in line with what this paper that studied the consequences for the states of the FairTax concluded.

[lewislynn]

Of course, in typical AFT fashion, there is an error - and it just happens to be in their favor [gasp].

I'll say there is. Not just an error but an obvious, intentional omission, because, unless I missed something in that laundry list, there are no employee wages, salaries and benefits included.

[Dimples]

Good point. Note also that the $414.7 Billion in education expenditures included Federal education expenditures. $349 Billion is the State/Local share. Of that, $271 Billion is Compensation; and, apparently, of that, only $140 Billion is non-taxable.

In my calculations I also lowered the total amount of State and Local spending due to savings from the repeal of FICA taxes and reduced non-compensation pre-tax costs. This both lowers the FairTax base and the total spend, but given your note that most education spending is actually taxable I reduced the total spent too much.

Revising the Calculations:

After adjustments, $ 1,112 Billion would be taxable under the FairTax. Of that, $655 Billion would be taxable Compensation.

Total FairTax due on that spending at 19.3% (inclusive) is $265 Billion of which $79 Billion could be paid by cost reductions (repealed FICA tax, pre-tax cost reductions) for a net Deficit of $186 Billion. Of the total FairTax due, $156 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 over 12% to make up the difference.

Total FairTax due on that spending at 23% (inclusive) is $332 Billion of which $79 Billion could be paid by cost reductions (repealed FICA tax, pre-tax cost reductions) for a net Deficit of $253 Billion. Of the total FairTax due, $195 Billion is due to Taxable Compensation alone (as compared to the $37 Billion paid today as ER payroll tax.) State and Localities will have to raise their taxes by over 17% to make up the difference.

Either way, a rather significant State/Local tax increase is in the cards with the FairTax.

By the way, the SAME problem exists for the Federal Government: its cash flow turns negative under the FairTax "revenue neurtal" rate leaving an operating deficit. While the Balance Sheet may show revenue neutrality, the cash flows don't balance.

[pigdog]

Oh, yes ... that wonderful paper you cite which is so informative as to name congressman Linder as "Linden" severlal times throughout. No doubt the rest of their "work" is as lthorough, too.

Sort of like they teach at Squirrel U., eh?

And I notice you never mention that the papeer is clearly biased toward the Status Quo nor do you point up any of the errors in it - yet you're fantastically quick to pounce upon and error (actual or supposed) relating to anything FairTax,

It would be more intellectually honest of you to admit that the paper was actually anti FairTax and slanted that way in its descriptions and analysis. But, hey, so are yours.

For only one example of this obvious slant, it is only necessary to see this sentence from the paper:

"One must question whether taxpayers will perceive the states to be akin to the tax farmers of the Roman era."

that statement is blatantly and grossly incorrect since the taxpayers (those doing the consumption) never have any contact with the states collecting the tax.

There are numerous other errors and inconsistencies - many of which we have already heard from the Squirrels on these threads when they procclaim them as gospel truth.