So, in the US, typically 20% of the price of something is actually the tax burden of the people making or providing the good or service.If that was fact (it isn't) how does the 23% Fairtax rate (actually 30% as sales taxes are calculated) replace that, all the other taxes, reduce prices 20% AND fund a refund to every family in America, as they promise?
You can be the first to answer that after 10+ yrs of asking.
You had the question answered hundreds of times previously Lewis but are too thick sculled to “get it”!
The FairTax base is very much larger than the income tax base Lewis!
If you go back all the way to the beginning of the 20th century, government revenue as a percentage of GDP has ranged from mid 18% range to the high 19% regardless of whether the economy was boom or bust and tax rates were high or low. For general discussion it is just easier to round it off to 20%.
How that 20% is collected has varied. You have excise taxes, income taxes, taxes masquerading as fees, estate taxes, gift taxes, corporate taxes, on and on. The bottom line is that every one of those taxes get embedded in the price of goods and services and are ultimately paid by the consumer. The method of collection can vary across a broad spectrum, but the money that gets paid as taxes comes out of the pocket of the consumer.
So, the Fair Tax, in order to eliminate all the other forms of taxation needs to provide roughly 20% of GDP to the government as revenue to directly replace the current tax system. The perceived tax rate may vary based on any gimmicks involved in the particular system. If you are going to do rebates (a gimmick), then a rate higher than 20% is necessary. However, the net effect will still be 20% if the system is set up to be revenue neutral. Eliminate the rebate, and you don’t need as high a rate. Politicians like the gimmicks to sell a proposal, but in general they do not really effect the burden the system places on the individuals. In the end, taxes are paid by the consumers and they generally balance out based on your level of consumption, regardless of the gimmicks in the system.
The overal benefit of the Fair Tax is that the consumer will end up paying a net 20%. Under the current system, they are paying a net 20% plus another 10 - 18% on imported goods and services.
Implementation of the Fair Tax will not be as easy as some would have it. All of the current inventory, both finished goods and inventory in the production flow have the 20% tax burden embedded in them already. A transitional process will be required to deplete current inventory and move to inventory which does not have an embedded tax content. This will be complicated, but it is doable and the tax bonus from the sale of imported goods and services will be a usefull tool during the transitional period.