Posted on 05/06/2009 11:57:23 AM PDT by Turret Gunner A20
Say I buy a car that sells in a Fair Tax climate for $60k.
I can pay for it with saved, post taxed savings, or new (pretaxed) income.
As an example, say I had to work 150 hours to earn that post-tax $60k. Further say I have to work 100 hours to earn a pre-taxed $60k under a Fair Tax system.
When I go to buy the car, that money is indistinguishable. Except one $60k cost me 150 hours of effort and has the Federal tax bite taken out of it already, and in addition will be subject to the tax on the sale. The other $60k cost me 100 hours of effort and has had no Federal tax bite then out.
150 hours doesn’t equal 100 hours, but $60k = $60k. They both have the same purchasing power under a fair tax system, but one is subject to being taxed twice by the Feds.
Unless I am missing something here (and I could be, I admit) the post-taxed and pretaxed money has the same purchasing power and is subject to the Fair Tax. Since I already paid Fed taxes on the post-taxed savings, I just don’t see that as even close to fair.
I’m of open mind on the issue but I have yet had it explained to me in a way that I’m satisfied that the post-taxed savings won’t be taxed again at the federal level.
We know you don’t know how to say it.
You don’t know accounting.
Well-known example of the missing dollar:
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Three men go on a hunting vacation to a hunting lodge and pay the lodge front desk clerk $10 dollar per room for a total $30. The clerk turns the $30 over to the owner of the lodge who remembers that he promised a $5 rebate. He orders the clerk to return $5 to the men. The clerk gives the $5 to the bellboy who goes to each of the rooms but before he knocks on the first room he ponders how to divide the $5 among the 3 men. He decides to give each man $1 and pocket the extra $2.
Later the clerk sees the hunters at which time they thank him for the $1 rebate. “Couldn’t ask for a better room at $9 a night!”.
The clerk seeks out the bellboy and in anger asks how much money did you keep for yourself???
The bellboy pulls out the $2 he pocketed and hands it to the clerk.
The clerk says “You are still keeping one dollar!!!”.
The bellboy asks “How do you figure that?”.
The clerk says “Each of the three men paid $9, that makes $27. You gave me $2, that makes $29. But when these three men came in they paid $10 each, that makes $30, not $29. There’s a dollar missing!”.
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Any competent accountant can straighten this type of nonsense out immediately.
Let’s look at your nonsense.
For our example of a married couple, two children, employed and filing jointly earning gross of $40,000, no deductions, no purchasing of used items (makes the FairTax result worse), paying $1,510 in federal income tax, assuming an average 20% reduction of pre-tax price in retail products and services, the results are given by the FairTax calculator:
http://www.fairtax.org/site/PageServer?pagename=calculator
When you refer to $46K, actually $46,217, you are referring to a level of spending to include the full NRST of $10,648.31. When the full NRST tax is subtracted from the $46,217, the result is $35,568.69.
Then the family receives a rebate of a portion of their NRST up to spending at the poverty level. The rebate is $6,297.
NOW NOTICE THE NEXT SENTENCE:
***The family spends the rebate on retail purchases and 23% of the $6,297 or $1,448.31 goes back to the government.***
Now let’s add up what went to actual consumption and what went as NRST taxes to the federal government.
Total spendable to family:
$40,000 + $6,297 = $46,297.
Total to government (NRST Taxes minus rebate):
$10,648.31 + 1,448.31 = $12,096.62
Net to family’s consumption (net spendable less NRST taxes)
$46,297 - $12,096.62 = $34,200.38.
Net to the government:
$12,096.62 - $6,297 = $5,799.62.
THEREFORE,
The family spent a total of $34,200.38 on consumption and $5,799.62 on NRST taxes. The total of these amounts is $40,000.
Another way to look at and more clearly see it is to view monthly amounts. I will leave that to you.
Returning to the hunting lodge example:
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The owner of the hunting lodge sees the clerk and the bellboy arguing. The owner steps in and explains how accounting is performed. “First you compute the goes-ins and then you compute the goes-outs. The goes-ins are $30 and the goes-outs are $5. The $5 goes out $1 to each guest and $2 to the bellboy. There is no missing dollar.
You should never use a net amount like $27 for the goes-ins!
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And you lewislynn should not blur consumption, taxes and rebates together and call it earnings!
Have a nice day or evening lewislynn. Hope you learned something!
that’ll be the day when anyone “learns” anything from one of your posts...
Well you’ve sharpened a little but not much.
You first started with $100 then $200 and who knows what in your post# 256. Your data now includes part-time wage earners such as students on summer break. They will not be receiving a rebate as they are dependents.
Note that current federal minimum wage is $6.55 which translates in a full-time work to 13,100 a year which is above the poverty line. Won’t be any free rebate money for full-time minimum wage earners.
Therefore your census data not only includes students part-time employees, or holiday help but also disabled and the unemployed. In such cases there will be insurance payments of partial disability or of social security or SSI, and also state insurance programs. Whatever the source, the money that ends up in the hands of a low-income person will be with high probability completely spent.
And don’t start diverting attention to other ‘socialist’ programs supplementing these low-income earners that I have alluded to. Insurance is insurance and pensions are pensions. If a retired worker wants to work part-time and also has a pension, I am not going to get into thickets of how they are receiving that money.
So your numbers of people falling in the low income categories may indeed be dependents or have supplemental non-earned income.
That said, let’s see what the maximum impact would be assuming unrealistically that all of these people are going to be taking the rebate and not paying it all back by spending too little for whatever reason.
After totalling up the number of wage earners you refer to, the number is about 12 million. If all 12 million receive a rebate of $196 in a month and that on average $100 is pocketed as profit after spending ‘too little’, the that’s 12 million x $100 = $1.2 billion per month or $14.4 billion per year.
So we will say for the purpose of this argument that $14.4 billion of rebate money falls into the hands of peopole that have not paid it back in NRST taxes.
Next look at the total earnings in your graph:
http://upload.wikimedia.org/wikipedia/commons/9/98/Personal_Income_Age25.png
Not counting the lower three bars, the total add up to about $5.1 trillion in earnings per year.
So the $14.4 billion paid out in freebies is about 3 1000th’s of a percent (.003) redistributed from the upper earners to the first three bars on your graph.
That is no where near a ‘massive’ wealth redistribution system.
This proves you have been barking about nothing.
People capable of learning will have no problem.
You and your fellow idiots will always have a problem.
Just sitting here twiddling thumbs wondering if the idiot jackals will converge upon the error or affirm the soundness of the principle.
They will converge upon the error without a doubt.
Just watch.
I suspect that they are busily constructing another straw man since you have very nicely shredded their previous one.
On a monthly basis the federal government gives back or credits NRST taxes that were paid in the month previous. So it is no mystery to see monthly income entirely spent followed by a rebate or refund of a portion of that spending to be spent again, resulting in spending higher than income. The simple fact is that a portion of the income is being spent twice because of the rebate.
For our example, a yearly rebate of $6,297 is $524.75 per month and gross earnings of $40,000 is $3,333.33 per month. When the full $3,333.33 is spent on retail the NRST taxes paid are $766.67 of which $524.75 is rebated for the following month and is spent again. That means for the first and second months $524.75 gets spent twice, and so on for the second and third months, the third and fourth months, etc.
So portion of the spending gets recycled and spending tops earnings income. No mystery whatsoever.
There is no injection of someone else’s money.
For our example of a married couple, two children, employed and filing jointly earning gross of $40,000, no deductions, no purchasing of used items (makes the FairTax result worse), paying $1,510 in federal income tax, assuming an average 20% reduction of pre-tax price in retail products and services, the results are given by the FairTax calculator:
http://www.fairtax.org/site/PageServer?pagename=calculator
When you refer to $46K, actually $46,217, you are referring to a level of spending to include the full NRST paid out of $10,648.31. When the full NRST tax is subtracted from the $46,217, the result is $35,568.69.
Now let’s add up what went to actual consumption and what went as NRST taxes to the federal government.
Total spendable to family:
$40,000 + $6,297 = $46,297.
Total to government:
$10,648.31.
Net to family’s consumption (net spendable less NRST taxes)
$46,297 - $10,648.31 = $35,568.69.
Net to the government (NRST Taxes minus rebate):
$10,648.31 - $6,297 = $4,351.31.
THEREFORE, the family spent a total of $35,568.69 on consumption and $4,351.31 on NRST taxes. The total of these amounts is $40,000.
THis is not possible if the family still gets there full $40,000 paycheck. There isn't that much saving to the employer if he is giving what was previously withheld payroll and income taxes to the employee instead of the government.
You can't have it both ways. The calculator is flawed.
You STILL don't know what you are talking about! The income tax system imposes a FAR greater load on U.S. produced goods and services than you realize and, because that is the way the politicians like it, the total amount is unquantifiable.
The FairTax calculator allows you to change it.
You can set 10%, 5% etc. Anything greater than 0% results in a beneficial effect to taxpayers.
The rest of your statement is false. The employer still receives 7.64% of the employer matched payroll tax as well as no tax on profits and a savings in compliance cost. Furthermore, the employer’s suppliers and services will experience the same savings and so will their suppliers and services. The effect accumulates significantly.
If the 7.64% payroll tax and FITW of 4% (of gross for our example) is given back to the employee in their take home, the employee takes home more than $4,500 (for our example) additional income in a year whereas the employer can reduce prices by over 14% depending on how labor intensive the business is.
And note the FairTax calculator does not assume the employee will receive any tax windfall from the employer so the pre-tax reduction of pricing can be set to the full 20% which is the average federal tax embedded into retail pricing.
But in any event, what the employee makes under the FairTax, they keep. There will be no federal taxes on pay.
You have no backup to claim there is not much saving to the employer if he gives the employee his full gross. But in many cases we can be sure that an employer is going to be competitive and will keep part of the employee’s withholding. By doing do the employee can take more home and the employer can lower prices even more.
So portion of the spending gets recycled and spending tops earnings income. No mystery whatsoever.The mystery is your lack of logic, or ignorance, or why you feel the need to lie, or all of the above.
It's mathematically and physically impossible to spend more than you earn without aquiring money from another source. You can write as many convoluted nutcase, self-contradicting essays as you want, nothing you write will change that.
On a monthly basis the federal government gives back or credits NRST taxes that were paid in the month previous.You're even ignorant to how the plan is designed...Does the word "prebate" mean anything to you?
Total to government: Net to family’s consumption (net spendable less NRST taxes)>BR> $46,297 - $10,648.31 = $35,568.69. Net to the government (NRST Taxes minus rebate): THEREFORE, the family spent a total of $35,568.69 on consumption and $4,351.31 on NRST taxes.
Total spendable to family:
$40,000 + $6,297 = $46,297.
$10,648.31.
$10,648.31 - $6,297 = $4,351.31.
The total of these amounts is $40,000.
What happened to the $6297 you said they spent?
BTW, no mattter how hard you try, if the fictitious family spends their entire $40,000 they would pay MORE tax under the Fairtax scam.
Currently they would pay:
$1015 (fed. income tax) + $3060 (.0765 FICA X $40,000) = $4075.00
By your own figures, even after trying to give them an additional $6297 they would pay:
$4,351...or $276 or 6%+ more than current.
Rebate or prebate, it makes no difference because the amount returned to the taxpayer gets spent again,
And since the rebate or prebate gets spent more than once it is no mystery that spending is more than earnings,
The $6,297 is an accumulation of $524.75 per month of rebate/prebate that IS SPENT AGAIN.
Either the $524.75 is credited up front or rebated the month after, it makes no difference as to how earnings are less than total spending, because the spending of the rebate/prebate is recycled.
Based on $40,000 earnings the monthly breakdown for when the rebate is paid the next month
Month -— Gross pay -— Rebate Credit -— NRST Net Paid
1 .. -— $3,333,33 -— $0.00 ....... -— $766.66 - $524.75
2 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
3 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
: .. -— ... : ... -— ..... : ..... -— ....... : .......
: .. -— ... : ... -— ..... : ..... -— ....... : .......
: .. -— ... : ... -— ..... : ..... -— ....... : .......
12 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
13 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
So it is clear that the Rebate of $524.75 is recycled from the previous month and credited to the current month where it gets SPENT AGAIN.
From months 2 through 13 that span 1 year the earnings are $40,000 and the Total Spending is $46,297 because the monthly rebate gets recycled and SPENT AGAIN.
For the other simple case where the federal government ‘prebates’ the family, the breakdown is similar and the result is identical:
Month -— Gross pay -— Rebate Credit -— NRST Net Paid
1 .. -— $3,333,33 -— $542.75*..... -— $766.66 - $524.75
2 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
3 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
: .. -— ... : ... -— ..... : ..... -— ....... : .......
: .. -— ... : ... -— ..... : ..... -— ....... : .......
: .. -— ... : ... -— ..... : ..... -— ....... : .......
12 .. -— $3,333,33 -— $542.75 ..... -— $887.36 - $524.75
* Rebate for first month only is paid ahead or ‘prebated’
As for your attempt to say that this family will pay more in taxes the answer is yes but that’s because they get to spend more. But if you equalize consumption levels, you will see that the Income tax is a much higher rate.
Under the FairTax the family of this example spends $46,297 and pays $10,648.31 plus $1,102.30 in local sales tax assuming a 5% rate. So their net consumption is the total they spend minus the taxes or $34,546.39.
Under the Income tax the family of this example spends $35,430 and pays $843.57 in local sales taxes but they are paying all the present federal embedded hidden taxes in pricing at an average 20% which amounts to $7,086. So their consumption is $27,500.42.
Now you can go to the calculator and input what you want for federal embedded hidden taxes that exist under the Income tax today. You can input 20% which is the average for all businesses and assumes the employees are not returned their payroll tax but keep the same take home pay or you can input any percentage you wish which indicates how much the employer is willing to give the employees extra. Some employers may do this, others may not in order to remain competitive.
In any case, as long as the percentage of embedded taxes is above zero, the family is able to consume or buy more under the FairTax.
Whatever is input the consumption is always the same under the FairTax for this family, it is $34,546.39.
For only a 10% decrease is the pre-tax price of goods and services, the hidden taxes are $3,543, and the total consumption (equivalently the current purchasing power) is $31,043.42 under the Income tax. That is less that under the FairTax.
For only a 5% decrease is the pre-tax price of goods and services, the hidden taxes are $1,771.50, and the total consumption (equivalently the current purchasing power) is $32,814.92 under the Income tax. That is still less that under the FairTax.
The effective tax rate is measured according to purchasing power and purchasing power always favors taxpayers under the FairTax. It matters not to the family what the percentage is, it matters how much they can buy with what they have on hand. Again under the FairTax the purchasing power is always more for taxpayers as long as pre-tax prices are decreased by any percentage above zero.
For an unrealistic 1% decrease is the pre-tax price of goods and services, the hidden taxes are $354.30, and the total consumption (equivalently the current purchasing power) is $34,232.12 under the Income tax. That is still less that under the FairTax.
And in order to believe this, you have to believe that American free markets are going to force retailers to lower their prices because they no longer have any federal taxes or costs of complying with the tax code. And they also will see price reductions from their suppliers and services and so on throughout the supply and production chains.
But in any case, whether employers give employees a raise in their take-home or not, there is going to be economic growth of at least 10% immediately in the first year and a continuing economic growth in each year following. Whether the employee has more money to spend, or the same but more purchasing power, or whether the employer keeps the tax windfall and starts to expand business, it will be a growth mode. More money will get spent in every case.
Sure it’s possible. See the specific easy and well-known example at the end.
A taxpayer spends their monthly paycheck of $2500 which includes a federal sales tax. But the federal government decides this person is not to pay the sales tax up to poverty line spending, so they rebate a portion of the previous month tax paid. The taxpayer gets the rebate plus next months paycheck and spends all of it. They have just spent a portion (the rebate) of their earnings twice.
A specific example that most everyone has seen. A person has a monthly paycheck of $2500 under the FairTax, and so they get to keep all of it. This person decides to spend all $2500 on a brand new computer but will receive an instant rebate of $300. So the person purchases $300 more goods in the computer store before checking out. They go to the checkout stand, they spend $2800 and that is reflected in the total at the checkout stand. But when it comes time to pay they hand over only $2500 because of the instant rebate.
And there you have it. A person’s pay is less than what they spend. And no credit cards involved!
The number $542.75 in the Rebate Credit column is a type. It should read $524.75.
That argument is incorrect.
So it doesn't seem like your argument is a serious case against "FairTax". But it does highlight a requirement to assure fairness which I do not believe is in the present proposal.
That being said, I don't think the "Fair Tax" is viable any more as means of saving the country. The IICOT have already gummed up the works trying to preserve liquidity and the favored class. The only possible outcome now is total collapse. We are now truly in Satan's handbasket...
What’s the IICOT?
Also total collapse will not happen as the USA holds the winning cards in the global economy. The only way to take those cards away is to defeat her militarily.
Example, China takes a hit on Treasuries and other Dollar denominated investments. So China grumbles and talks about another currency standard. Rots of Ruck. There is no other currency and will not be. It’s all influenced by Federal Reserve notes.
And that’s the way it is going to stay. The security is here.
So although ‘total’ collapse is not in the cards, a collapse of control is in the cards brought on by the grassroots. The Tea Parties, the State Sovereignty movements, the cycle of reform especially tax reform.
Obama and his handlers are playing it safe and are finding they can’t play their way much. Health Care Reform will only inflame the grassroots further. So they are going slow trying to find an opening in which to make their play for it. And this is the same for other liberal causes.
They are genuinely afraid of the growing grassroots.
Example: FairTax AFFT grassroots is growing by 800 members every day on average, 7 days a week.
What will neuter the grassroots is an improving economy which they are trying to ‘talk up’ (as Bill Clinton et al would say) and ACORN getting control of more election districts.
So their aces are:
Improving Economy
ACORN
Those are the two things that will give them continuing power.
They could also adapt Clintonian tactics and create conditions, or cause an event to be engineered so that they can be seen as managing the crisis. For example, another Kosovo.
But you are right about the FairTax in that it will not be accepted by the White House or Congress. But the grassroots can drive it through the States.
First, there are State FairTax movements for tax reform at the state level.
Second, there are provisions in the US Constitution that allow the States to force Congress to do something.
So although it will take a while longer, a winning strategy is:
* State FairTax movements get traction, get good press, get tested and are shown to be successful.
* States push for FairTax legislation at the Federal level using Constitutionally granted powers.
* States repeal the 16th Amendment and enact the FairTax to replace the Income tax.
As for the FairTax saving the nation, yes it can. There are up to $17 trillion offshore that can be repatriated and cause the US to dominate manufacturing again as well as trade.
But some collapse must come first. For Example, the UAW will own a controlling interest in GM. Union run companies usually fail over time. Therefore, the UAW will fail along with its control of auto manufacturing. The collapse must bring about political reform in union controlled states.
When these kinds of events happen, then and only then will real FairTax materialization take place.
I am not worried about how long it takes. It took 52 years including time through a Civil War to make the Income tax without apportionment legal.
We’re only ten years into the FairTax.
But it would be sweet poetic justice to see the FairTax passed or enacted in 2013, exactly 100 years after the malignant abomination was ratified.
Sorry, IICOT <—> Idiots In Charge Of Things.
As far as a collapse goes, I’m not saying it will be a catastrophe. It might be things just decaying into a muddle until some event occurs which forces everyone to show their cards. If history is a guide, this might take decades or longer.
The truth is that the fair tax works a lot better because not only is privacy respected, also because it forces government to LIVE IN ITS MEANS.
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