“Or, you can buy a domestic car. According to some Fair Taxers, domestic car manufacturers will reduce the price of their cars by 23% when they remove the hidden taxes, then add the 23% Fair Tax, resulting in that $21,000 car costing the same. You’ll still need a down payment and you’ll still need to come up with $6300.”
Faulty math...why are you using fair tax rate as 30%? Fair tax at 23% on a 21,000 car is $4830. Now, if the hidden taxes on the car match this, the cost of the car should be $16,170. Fair tax on this at 23% is $3719. Cost of car, $19889.
As to the comments about domestic vs foreign, look at it this way...foreign costs less for equal quality, comfort etc. Fair tax will hit the net cost of the foreign car more than the domestic car if the US manufacturer eliminates the hidden taxes that are not there now. All of a sudden the US economy gets a big shot in the arm because domestic cars are now competitive with the foreign. This will ring true in every industry if we still have manufacturing for that industry.
Btw, I am not arguing for or agin the F-Tax. Just commenting on the comments I have been reading, and these in particular.
You are correct. My math was indeed faulty.
A 21,000 car today contains about 23% in hidden U.S. taxes that the Fair Tax will remove. This will drop the price (assuming the manufacturer passes on all of the savings) to $16170. Add the Fair Tax of 23% and the car is back up to 21,000.
(No, that's not an error. The Fair Tax rate of 23% is not applied like a sales tax even though it's called a sales tax. It's applied like an income tax.
For example, a $100 item on the shelf contains $23 in Fair Tax. Ergo, 23%. The item without the tax is therefore $77. A tax of $23 on a $77 item is a 30% sales tax.)
Back to the cars. So a domestic car stays at at 21,000. If the import it competed against was also priced at $21,000, its price will be going up to $27,300. (That price contains 23% or $6,300 in Fair Tax added to a $21,000 car.) The price of the import can't be reduced because there are no hidden U.S. taxes.
"All of a sudden the US economy gets a big shot in the arm because domestic cars are now competitive with the foreign"
They sure are! What used to be head-to-head competition is now a blowout! $21,000 for domestic vs $27,300 for foreign? A no brainer!
Now, between us boys, how long do you think Detroit will keep its cars at $21,000 when imports are at $27,300? Hell, they can go to $26,300 and still undercut them foreigners by a thousand bucks! And that gives them $5000 per car to give them union boys a big raise and the whiny stockholders some dividends.
Am I right?
Good reporting. However, when interest rates drop, I have never seen the cost of a car drop. Usually such a drop is when the new models come out or sales are sluggish.
The government has mandated that cars meet a certain gas mileage. In response, local governments raise local gas taxes to make up for lost revenue - including talk of using satellite tracking.
In summary, there is no tax some politician didn’t like. Taxes are like a balloon, squeeze one place and it pops out elsewhere. But if it makes the dreamers happy, have at it.