The Rally Was a Tremendous Success! Whew! (FairTax)

Nealz Nuze ^ | May 16, 2007 | Neal Boortz

[SittinYonder]

THE RALLY WAS A TREMENDOUS SUCCESS! WHEW!

FairTax Rally Gallery Well .. you came, didn't you? Thousands of you! What a tremendous night it was last night at the Carolina Coliseum. We had about 10,000 seats curtained off, and as I looked around I don't think there were 1000 empty seats ... all of them up near the rafters. So I'll estimate the crowd at between 8,500 and 9,000. What a night! Music from Banks and Shane and the Swinging Medallions ... and appearances by Governor Mike Huckabee, Congressman Duncan Hunter, Sean Hannity and John Stossel.

The really amazing part of the rally was when we all left the coliseum with thousands of FairTax signs to march around the Koger Center .. the site of the debate. Everyone was orderly --- but if you'll look at our picture galleries you'll find that we pretty much had all of the territory covered with FairTax supporters.

Several anecdotes of encounters with the staff of presidential candidates are starting to filter through. Some McCain staffers questioned some FairTax supporters about how they got there, thinking that they had been bussed in. They seemed impressed that most of the people there had driven to Columbia on their own.

There is no doubt that this rally last night had an effect. The crowd was so large that it cannot be ignored. The two big presences in Columbia last night were the presidential candidates and the FairTax.

Thanks so much for the sacrifice you made to get there. Now it's on to Ames, Iowa for a rally on the eve of the Iowa Caucus!

[The Pack Knight]

As does the FairTax, although the FairTax may make it easier to manipulate behavior by adjusting the rate on specific goods or services, i.e., sin taxes. The Flat Tax has no exemptions except for a standard personal exemption.

The FairTax has no current exemption for specific types of goods or services either. The fact that it might be changed in the future does not differentiate it from the Flat Tax.

Unless, when the Flat Tax is passed, the 16th Amendment is also altered to prohibit varying tax rates, what's to stop some politician from raising the tax rate on the "top 1%" while cutting taxes for "working families"? Then, the next year, it's the top 5%, while a new bracket is made for people making less than 10%. It's basically what happened when the income tax was introduced in the beginning. Something similar happened when the number of tax brackets was reduced to two in 1986. The number has gradually expanded to five since then.

Look, if we rule out tax reform proposals simply based on what tinkering politicians might do in the future, then we aren't going to get any tax reform, Flat Tax or FairTax. The best defense against that is transparency. The FairTax has that because the tax will be displayed on every reciept for retail goods. The Flat Tax could have that so long as tax withholding is abolished, though there will still be the issue of employee (and corporate, if the Flat Tax includes that) income taxes being reflected in the end price of retail goods, what we refer to as the "embedded tax".

Politicians will never stop trying to play one constituency off against another. The only thing we can do is to make the effects of their pandering obvious to everyone who pays the price.

[RC51]

What about sales tax on cars? I need a new truck and the one I’ve been looking at runs $30,000. Right now State sales tax is going to add on another $1,300. If your “fair tax” is passed then I would have to pay another $6,900. So now my 30k truck purchase immediately becomes $38,200?

What about used cars? Do they get taxed? How about ebay, garage sales and flea markets do they get the 23% tax job too? Are is the sales tax going to be collected and enforced? What about sales on services like going out to eat or getting a massage? What about Medication? Or Groceries?

Just seems to me that taxing consumption is about as regressive as it gets.

[Your Nightmare]

99.44*1.2987

Um, you didn't use the tax inclusive method.

There it is. Trivial. 1.2987 IS 1+23/77. No worries.

What you are really saying is the "no worries" way to calculate sales taxes using the tax inclusive rate is to use the tax exclusive rate.

[The Pack Knight]

Only new items are taxed. Used items previously taxed are not taxed a second time when resold. That includes used cars, used houses, or used items at flea markets.

New cars, new houses, and other new items are taxed. Medication, groceries, visits to the doctor, and services are also taxed.

What you may not realize is that you already pay a tax every time you purchase any of these items. Corporate income taxes, as well as the additional payroll budgeted so that employees wages are still competitive after income and payroll taxes, are reflected in the end price of all goods and services. If corporate and personal income taxes are eliminated, the cost of producing goods and services will decrease. Competition will ensure that the price also decreases.

The "embedded tax" has been calculated as 22% of the cost of an item.

As for the tax being regressive, every taxpayer will receive, each month, a prior rebate, what we call a "prebate", for the expected tax burden of purchasing the basic necessities of life, determined by the poverty level. The size of the prebate is determined by the number of adults and dependents in the household.. nothing more. The prebate completely removes the tax burden on those who spend at or below the poverty level. They will not even have to pay the taxes business currently pass onto consumers in the form of higher prices. What could be less regressive?

[Your Nightmare]

The FairTax has no current exemption for specific types of goods or services either.

Sure it does, e.g., business purposes, investment, education. And like any other law, it can be changed in the future (e.g., a new home is an "investment" and should not be taxed, daycare is really "education", etc.).

Unless, when the Flat Tax is passed, the 16th Amendment is also altered to prohibit varying tax rates, what's to stop some politician from raising the tax rate on the "top 1%" while cutting taxes for "working families"? Then, the next year, it's the top 5%, while a new bracket is made for people making less than 10%. It's basically what happened when the income tax was introduced in the beginning. Something similar happened when the number of tax brackets was reduced to two in 1986. The number has gradually expanded to five since then.

The same thing that would keep Congress from charging different rates on different product (luxury tax, sin tax) under the FairTax or means testing for the Family Consumption Allowance. Nothing except pressure from their constituents.

[The Pack Knight]

Oh, and they have a very comprehensive FAQ at FairTax.org. You'll find a lot of answers to your questions there.

There is also a book out in paperback called "The FairTax Book" by Neal Boortz and Rep. John Linder. They are currently writing a new book of rebuttals to common criticisms of the FairTax, that I believe is due out this year.

I encourage you to look into it. I myself am a former Flat Tax proponent and National Sales Tax skeptic, but I'm convinced that the FairTax is the best tax reform proposal out there.

[Principled]

It seems as though your analysis is faulty in that it includes the cost of the nrst but excludes the cost of the income tax. It's a common error and sometimes people do it on purpose.

If I buy a 30k automobile today, I have to earn 40k. This is because I'm have a 25% effective federal tax rate today. So the "cost" of the car isn't 30k at all, it's 40k.

If I buy a 30k automobile under the nrst, I will have just to earn 35.5k. THe calculation is 30k*.91 = 27300 (reflecting a 9% reduction in pre-nrst prices - stipulated by the most vehement anti-nrst posters) then 27300*(1+23/77) = 35454.

So I have to earn LESS under the nrst in order to buy the car. Indeed I would have $4500 extra left in my pocket under the nrst.

Please note that the above uses my effective income tax rate but my marginal nrst rate - my effective nrst rate would be lower = say 17%). That is, I am neglecting the effect of the rebate (on my purchasing power.)

"Used" cars are not taxed. "Used" means that tax has been paid on it before via the nrst OR by being produced under the income tax system... for example, houses sitting for sale today won't have any nrst added if they're sold after the nrst is implemented. If the item is used, there's no tax.

Groceries, medicines, massages and the like are all already being taxed via the income tax system (as described above) and will be taxed under the nrst.

The rebate mechanism, however, prevents regressivity.

[The Pack Knight]

Then I take it we're in agreement that neither the FairTax nor the Flat Tax is immune to tinkering by politicians for the purposes of pandering their constituencies?

The only thing protecting either from Congressional meddling is transparency. I happen to think the FairTax is more transparent than the Flat Tax.

[Principled]

Um, you didn't use the tax inclusive method.

Yes, I did.

What you are really saying is the "no worries" way to calculate sales taxes using the tax inclusive rate is to use the tax exclusive rate.

No, I'm saying that they are the same. It's what I've been saying for 9 years here.

There is no difference in finding a price for, say, a $58.93 item using either method. They are equivalent methods.

a) 58.93*.2987
is the same as
b) 58.93*23/77

that's because 23/77 IS .2987012987...

Method b) is slightly more accurate.

sheesh.

[Principled]

Please be wary of Boortz. He is not so well informed on the specifics and plays to generalities. I encourage you to refrain from using him as a primary source. :)

[Man50D]

Of course, little or no media coverage despite all the people there.

Eventually the number of Fair Tax supporters will become so large the media will not be able to ignore the movement without looking foolish.

[Your Nightmare]

Yes, I did.

Price x Tax Exclusive Rate is not using the tax inclusive method.

There is no difference in finding a price for, say, a $58.93 item using either method. They are equivalent methods.

The methods aren't equivalent, the results are. There is a huge difference.

58.93*.2987 is the same as b) 58.93*23/77

You didn't show all the steps (I wonder why). It actually is:

58.93 x .23 / (1 - .23)

And when the inclusive rate changes to 22.52%, for example, (the rate will change after the first year and it almost certainly won't be a nice round number), this becomes:

58.93 x 22.52 / (1 - 22.52)

Good luck guesstimating that out when you're shopping. Only in FairTax Fairyland is this not more complicated than:

58.93 x .291

Like I said, the only reason for a tax inclusive sales tax rate is to confuse people.

[HundredDollars]

drop the ‘tax inclusive’ rate specification (don’t even bother me with trying to explain it anymore, I understand what it means and it sux and so do you if you want to use that - it gives the perception of a lower tax rate and I don’t want to start any discussion with deception at your core)

Judging by this post and those you have followed up with, you most likely do not understand what it means.

Since you have stated that your not interested in hearing it explained anymore I am posting the following explanation for any other Freepers or lurkers who are trying to understand this tax inclusive controversy. There is no deception, just a distinction. The tax inclusive rate is used to compare apples to apples in tax rates since Flat Tax (and Income Tax) are applied to earnings and Fair Tax is applied to consumption. An hypothetical example to illustrate follows:

Two Taxpayers each earn $100. (Assume each persons income/consumption has surpassed the point of any deductions/rebates affecting the nominal tax rate on these particular earnings.)
Flat Taxpayer (10%): The government takes $10 tax upfront so he takes home $90 in his pocket which he uses to purchase goods worth $90.
Fair Taxpayer (10% inclusive) takes home $100 in her pocket which she uses to purchase goods worth $90 plus $10 tax to the government collected by the retailer at the time of purchase.

Each earned $100, each bought $90 worth of goods, each paid $10 in taxes, so are their tax rates the same or not?

But $10 is not 10% of $90 spent at the retailer so you say the Fair Tax 10% inclusive rate is deceptive.
Fairtaxers say $10 is 10% of the original $100 earned so they say it's synonymous with the Flat Tax 10% rate.

Each Taxpayer bought $90 worth of goods and the government got $10 in tax from the original $100 earned. Flat Tax of 10% equals Fair Tax of 10% inclusive. Apples equals apples. These two tax rates are equivalent. It's not a matter of perception, it is a matter of accuracy. Flat Tax rates (and Income tax) rates are inclusive when examined at the time of purchase, they are just not declared as such.

Why should an equivalent tax rate be stated in different terms?

To state it another way, when purchasing a vehicle would you prefer the vehicle getting 40 miles/gallon to over one getting 17 kilometers/liter, or would you convert them to the same terms, correctly declare the gas mileage equivalent and use other features to make your purchase decision?

Sorry to post and run, but I have a doctor's appointment. Won't be able to check back in until tomorrow. Please feel free to defend/correct/add to my post in my absence.

[Principled]

Good luck guesstimating that out when you're shopping.

You said calculate. Now you say guestimate. I wonder why.

It's no easier to calculate either rate. If you want instead to estimate, why worry about accuracy. That is, after all, the function of estimating - to get close but not worry about being exact.

Tax inclusive 22.52% is easy too. It's just 58.93*22.52/77.48. Done.

It's just as easy to do tax inclusive as exclusive. And if that's really why you think inclusive methods are used, why does your flat income tax use inclusive rates? Sheesh.

[Your Nightmare]

You said calculate. Now you say guestimate. I wonder why.

I said calculate, but people aren't going to be calculating P x Ti / (1 - Ti) in their heads when shopping.

It's no easier to calculate either rate.

Are you seriously trying to claim that

P x Te

isn't easier than

P x Ti / (1 - Ti)

Only from a FairTaxer...

Tax inclusive 22.52% is easy too. It's just 58.93*22.52/77.48. Done.

And where did the 77.48 come from?

It's just as easy to do tax inclusive as exclusive. And if that's really why you think inclusive methods are used, why does your flat income tax use inclusive rates?

Because what's being taxed with the Flat Tax, wages on the personal side, includes the money to be used to pay the tax (thus the inclusive rate). It's a percentage of the base, not on the base.

[Principled]

And where did the 77.48 come from?

This, I believe, is the crux of your problem understanding this. If you don't know where that came from, you probably do wonder why the methods are equivalent and also wonder why it's so easy... it's only easy if you understand it (like most things).

[SittinYonder]

If you buy a new tractor for your son to mow your lawn at home

If I buy a new tractor, it's for me. The kid can use the old one.

[Your Nightmare]

This, I believe, is the crux of your problem understanding this.

I know where it came from, but you simplified the calculation by eliminating the step to determine this number.

Here's a tip - if you want to simplify the calculation even more - use the exclusive rate.

If you don't know where that came from, you probably do wonder why the methods are equivalent and also wonder why it's so easy...

The only thing I'm wondering now is how it must feel to continually have to twist logic and reason to promote this dog.

it's only easy if you understand it (like most things).

I understand completely—on all levels—what you are doing.

[Principled]

You’re telling me it’s more difficult to calculate the nrst inclusive rate than it is to calculate the exlusive nrst. That’s wrong. I’ve shown 3 times how easy it is and all you do is say I’m doing it the easy way. LOL. Both ways are easy.

[Principled]

$132.47 item. 23% nrst.

new price using inclusive rate: 132.47*(1+23/77)=172.04
new price using exclusive rate: 132.47*1.2987012=172.04

$38.53 item. How about a 19% nrst?

new price using inclusive rate: 38.53*(1+19/81)=47.57
new price using inclusive rate: 38.53*1.2345679=47.57

It is simple to calculate either method. Both are trivial.

The most difficult thing to do is to change an inclusive rate to an exclusive rate or vice versa. Luckly, it isn't necessary at all. One doesn't need to change from one to another...unless you want to be able to compare today's inclusive rates (income tax rates are inclusive) to an exclusive rate. Why you'd want to do that is a mystery. If you want to compare today's income tax rates - which are inclusive - to some other taxing method (nrst), wouldn't you choose to use the inclusive rate?!

If the rate is inclusive, just use the inclusive method.