Replies

1)You don't have the right FCA
2)It isn't clear how you came up with tax. Can you elaborate? You have used the FCA as income, which I didn't. I used an allowance to determine an effective rate on all purchases. We can do it your way, but you must explain how you determined your effective rate. In your example, using the FCA as income increases taxes by 1000 or so but increases income 4508. I'm happy to do the calculation this way, but I always use the most conservative plan.

97000+4508=101508 (add FCA as income)
101508*(1+9/91)=111547.25 (cost reductions or wage increases pre-nrst)
111547*(1-.23)=85891 (tax)

That's higher than the income tax's 80291.

The difference in 85891 and my original 87033 being the tax paid on the rebate you chose to include as income (although I don't agree that's the best way to show it, I will do it this way for now).

As far as following your calculations, it isn't clear what you did. If you can elaborate on how you did things then it can be analyzed. As it is, everyone is left guessing at what you did.

My calculation above is purposefully made clear for you to analyze.

1)You don't have the right FCA

We are using 2003 income and tax data. I used the 2003 FCA for a married couple with a child from here ($4,853).

It isn't clear how you came up with tax. Can you elaborate? You have used the FCA as income,

No I didn't. I added it to their income to get their gross spending. I then multiplied that by the FairTax rate to get their gross FairTax paid. I subtracted the FCA from gross to get their net FairTax paid. Dividing this from their income gives you their effective income tax rate.

The difference in 85891 and my original 87033 being the tax paid on the rebate you chose to include as income (although I don't agree that's the best way to show it, I will do it this way for now).

I didn't include it in income, I included it in spending (you do expect people to SPEND the FCA, don't you?). The FCA is taxed when spent. It, like all other government transfers, is reduced in value by the amount of the FairTax.

97000+4508=101508 (add FCA as income) 101508*(1+9/91)=111547.25 (cost reductions or wage increases pre-nrst)

Why would you increase the FCA by the percentage of wage increase? You should increase the wage and THEN add the FCA to get total spending (you need total spending to determine total tax paid).

$97,000 * (1 + 9/91) = $106,593 wages.
$106,593 + $4,853 FCA = $112,446 total spending.
$112,446 * .23 = $25,862 gross FairTax paid
$25,862 - $4,853 FCA = $21,009 net FairTax paid.
$21,009 net tax paid / $106,593 income = 19.7% effective tax rate.

And we haven't adjusted their state and local taxes yet.