CALCULATE YOUR PERSONAL FAIR TAX RATE COMPARED TO YOUR 2004 INCOME TAX-FICA TAXES

What are my necessities and what do they cost me know?

I don't KNOW, it depends, are you in an institution, on welfare, or self supporting?

The NRST, unfair tax idea is a loser from the start!! I'm for a flat tax, period! Forbes had it right and the Pubbies and RATs seem to ignore his great ideas re flat taxes. Russia now has a flat tax and their gummint is raking in the money. If everyone paid a flat tax of 17% on all income from whatever source, with rebates for those under the $25K low income limit, tax income for the Feds would increase and we would be better off than we are now by far. Better yet, the hated IRS would be eliminated.

A NRST would create yet another big gummint agency to keep track of the millions of retailers out there that would have to collect the tax and make sure they submit them to the feds--a practically impossible task full of potential mischief and big-time fraud. We want smaller gummint, not larger!

I don't KNOW, it depends, are you in an institution, on welfare, or self supporting?

Do any of those make me more, or less qualified, for the rebate on my "necessities"?

Forget the income tax rate only. What will be the comparison of sales tax rates? Will the cost of living, tax included, go up or down?

A NRST would create yet another big gummint agency to keep track of the millions of retailers out there that would have to collect the tax and make sure they submit them to the feds

Hardly, seeing as that agency already exists, and we will be abolishing the federal presense in the tax game as far are business is concerned. Dropping from federal and state agencies in everyones business to just your state tax authority administrating taxes in retail business is a big step forward in my eyes.

House Ways & Means archives 106th Congress:

Statement of Billy Hamilton, Deputy Comptroller,
Office of the Texas Comptroller of Public Accounts,
on behalf of Honorable Carole Keeton Rylander,
Texas State Comptroller of Public Accounts

Testimony Before the House Committee on Ways and Means

Hearing on Fundamental Tax Reform

April 11, 2000

My name is Billy Hamilton, and I am the Deputy Comptroller for the State of Texas. Carole Keeton Rylander, the Texas Comptroller of Public Accounts, was delighted to receive an invitation to testify before this committee regarding the Fundamental Tax Reform measures under consideration today. Unfortunately, Comptroller Rylander's schedule did not permit her attendance, and she has asked me to testify here on her behalf.

My comments today are directed only to the feasibility of state administration of the Fair Tax proposed by H.R. 2525. I do not intend to comment on the economics or any other aspects of the proposal.

The Texas Comptroller's office has administered a sales and use tax since the 1960's, and I have been involved with administration of the tax since 1982. Last year, the Texas Comptroller collected $13 billion in sales tax revenue from more than 600,000 businesses. I offer my own experience with sales tax administration, as well as the size of Texas' sales tax program, as the basis of my qualification to speak to you about the administerability of H.R. 2525.

As you know, H.R. 2525 would permit states to collect and administer the Fair Tax on behalf of the federal government. In my opinion, Texas would be well-equipped to administer the Fair Tax based on our experience in administering our own sales tax. Even though the base, rate and other characteristics of the Fair Tax are significantly different from the Texas sales tax, it would be feasible for our office to collect the Fair Tax by expanding and enhancing the systems we currently have in place. For example, we would:

· Expand our current system for registering Texas retailers to include registration of sellers under the Fair Tax (615,000 businesses are currently registered as sellers in Texas; under the Fair Tax, 1.5 million Texas businesses would have to be registered);
· Expand our taxpayer assistance efforts to respond to a larger volume of telephone, letter and e-mail inquiries from sellers who collect the Fair Tax and individuals who pay it;
· Expand our Revenue Processing Division to process more returns and tax payments on a more frequent basis and to remit tax collections to the federal government on an almost-daily basis;
· Expand our current audit team and train all auditors to examine businesses for both the Fair Tax and the Texas sales tax; and
· Expand our information technology systems to collect and maintain the computerized records critical to effective administration of a consumption tax like the Fair Tax.

The expansion of our systems to administer the Fair Tax, in the manner I've just described, would be sizable. Under the Fair Tax, we would serve approximately 900,000 more filers than we do currently. We estimate that serving that many additional taxpayers would require 1,100 to 1,600 more full-time employees. The Texas Comptroller currently employs about 2,700 people on a full-time basis.

In spite of this large expansion, the compensation for collecting the Fair Tax that would be provided to states under H.R. 2525 would likely cover our projected costs. As a first approximation, we estimate that the cost to the Texas Comptroller's office for collecting the Fair Tax at full implementation would be $100 to $150 million per year. I emphasize, however, that there would be significant costs to begin collection, including the cost of facilities to house the additional processing facilities, the capital costs of information technology and revenue processing equipment, and the costs of notifying, registering and educating taxpayers on the new tax.

In closing, I believe that if the Fair Tax is to become a reality, the U.S. government would be well-served to make use of the existing expertise of the states. Many states have administered consumption taxes since the 1930s and have developed particular capabilities in this area. We also have extensive experience in dealing with the affected businesses. As long as the administrative fee paid to the state is adequate in relation to the costs of collection, I see no reason that the State of Texas could not effectively administer the Fair Tax.

Will the cost of living, tax included, go up or down?

Cost of living goes down, from increased productivity and lower overhead costs on business from the repeal of federal income/payroll taxes.

The Economic and Civil Liberties Case for a National Sales Tax, May 11 '95
Stephen Moore
Director
Fiscal Policy Studies
Cato Institute

Economic Impact of a National Sales Tax
In 1993 the Cato Institute commissioned a study by economist Lawrence Kotlikoff of Boston University to examine the economic impact of replacing federal income taxes with a national sales tax.(20) The sales would apply to all consumption purchases-- including services. Only real estate and securities would be exempted. The purpose of the Kotlikoff study was to determine a) What would be the impact of the sales tax on economic variables such as savings, wages, and output? and b) What is the necessary sales tax rate to completely replace on a revenue neutral basis the federal personal income, corporate income, and estate tax?
Kotlikoff discovered that to completely replace federal income taxes would require an

initial sales tax rate of 17.4 percent.
After five years the rate could be reduced to 15.4 percent, and
after ten years the rate could be lowered to 13.9 percent.

The reason the rate can be lowered is that the study finds a very positive economic feedback from the tax change. Specifically, the Kotlikoff study finds that after ten years, a national sales tax would:

1) More than double the national savings rate.
2) Increase the capital stock by 8 percent above the level attained under the current tax system.
3) Raise income and output by 6 percent more than would be achieved under the current tax system. That would increase national output by almost $400 billion per year.
4) Lift the real wage rate by 3 percent.
5) Reduce interest rates by 8 percent.

Kotlikoff concludes the study by issuing the following endorsement for a sales tax: "A shift to a national sales tax has the potential for dramatically improving incentives to save. The distortion to save is so great under our current system of income taxation, that it appears we could switch to consumption taxation...and end up with much higher rates of saving and capital accumulation and a higher level of per capita income."

That's not counting the fact that a National Retail Sales Tax would remove the IRS as a factor in the daily lives of americans. It would assure the proportional participation of all voters in the tax burden so Congress Critters would have a much more difficult time in playing rich vs. poor games by hiding taxes behind inflation as it does today.

ROTFLMAO! One of the funniest posts of the year!

What are my necessities and what do they cost me know?

What do you spend your standard deduction on now and what do they cost you?

initial sales tax rate of 17.4 percent.

That's replacing the income tax alone with no demogrant. Kotlikoff stated in 2000 that the FairTax rate would have to be 30% inclusive.

Lift the real wage rate by 3 percent

Real wages in Kotlikoff's paper only increase to 3 percent after 10 years. Initially they drop, which, BTW, means PRICES DON'T DROP WITHOUT WAGES DROPPING!!!

Reduce interest rates by 8 percent.

In Kotlikoff's paper, interest rates only drop this amount after 10 years. Initially they rise.

What do you spend your standard deduction on now and what do they cost you?

I thought you already knew. I asked you first.

What is the per child fairtax tax credit?

Even if I did take the standard deduction it would have been $9,700. What would my "poverty level" rebate for my necessities be?

Interesting isn't it. You take the view of Kotlikoff from 1996 static distributional analysis based on tax law and projections of that time to bolster your non-arguments.

Where Kotlikoff today highly recomends the Fair Tax over even your favorite, the flat tax.

Wonder what he has learned from his studies in the interim the you fail to see.

The Case for the 'FairTax'

By LAURENCE J. KOTLIKOFF

Wall Street Journal, March 7, 2005; Page A18

Our tax code is a mess for a reason. Special interests pay for special favors. And with 17,000 pages and counting, there's plenty of places for our politicians to hide the kickbacks. Meanwhile, all the exemptions, deductions, exceptions and special provisions reduce the tax base, which means higher tax rates and smaller incentives for individuals and companies to produce income. And whether the tax breaks are set in fine print or spelled out in bold type, they generally favor the rich, making our tax system less progressive than is generally believed.

No tax system is perfect, but ours is so awful that fundamental reform is the only option. Fundamental reform is not just a necessity; it's also an opportunity to stop taxing income and start taxing consumption. My colleagues and I have been studying income and consumption taxation via computer simulations for some time now. We've found that switching from taxing wage and capital income to taxing consumption can significantly improve economic efficiency and growth. What's more, it can make our tax system much more progressive and generationally equitable.

* * *

Efficiency means different things to different people. To economists it means equating the extra output workers and savers generate for society with the extra compensation they receive for their sacrifice. Government taxation throws a wrench into this equation, setting the private return from working and saving below the social return and leaving the public supplying too little labor and capital.

When tax rates get really high, people stop working and saving altogether. At that point, everyone can see the system's nuts. But even moderate tax rates can cause major economic distortions. Unfortunately, our tax rates, particularly on labor earnings, aren't moderate. They're high. This is true despite recent federal tax cuts. Add together all the federal and state personal income, payroll, excise and sales taxes, and you quickly reach effective wage tax rates of 50% -- and not just for the rich and middle class. For the poor, the rates reach this level thanks to their loss of welfare and health-care benefits as well as tax credits from earning more money.

The bottom line is that our tax rates remain far too high and continue to generate a very large efficiency loss from taxation. The introduction of a consumption tax would broaden the tax base, significantly reduce tax rates, and improve economic efficiency. The efficiency gain comes not just from lowering rates; it also comes from effectively taxing something whose supply can't be distorted. That something is the existing stock of wealth.

Democrats need to listen up here. Their view that taxing sales is regressive is just plain wrong. Taxing consumption is effectively the same as taxing wages plus taxing wealth. The logic is simple if you consider the most straightforward way of taxing consumption, namely via a retail sales tax. In this case, when people spend their wages or their assets on goods and services, they pay sales taxes, meaning they end up with less to consume. This is no different from having the wages and wealth directly taxed, but facing no sales tax.

But what about saving one's wages and wealth and spending these funds plus accumulated interest in the future? Doesn't this avoid the consumption tax? No. You end up paying consumption taxes not just on the original sums, but also on the accumulated interest. The same holds if you save your wages and wealth and give it to your kids. When they spend it, they pay consumption taxes on both P&I. In present value it's the same as taxing the wages and wealth immediately. Thus a retail sales tax, with its effective wealth tax component, is highly progressive compared, for example, to taxing just wages.

Over the years, we've moved pretty darn close to just taxing wages by reducing capital gains and dividend taxes and expanding tax advantaged retirement accounts. In the process, we've not only reduced overall progressivity. We've also shifted the tax burden from the elderly, who receive most of the capital income, to the young, who earn most of the labor income.

The FairTax proposal, which awaits Congressional passage as H.R. Bill 25, would greatly rectify this intra- and inter-generational inequity and do marvelous things for our economy. The FairTax (details at www.FairTax.org) replaces not just the federal and corporate income taxes, but also the federal estate and gift taxes, and the highly regressive FICA payroll tax with one simple and fully transparent federal retail sales tax. In addition, the FairTax provides a highly progressive rebate to each household of their sales tax payments on consumption expenditures up to the poverty line.

Assume H.R. 25 becomes law. Overnight, people would move from paying, to the feds and states, roughly 50 cents per dollar earned on their supplies of labor and capital to roughly 30 cents. Because the relationship between tax rates and economic distortions is non-linear, this would reduce the excess burden of our tax system by roughly two-thirds! A very conservative estimate of this annual saving is 2% of GDP or about $250 billion for the coming year. Add in the aforementioned $250 billion in wasteful tax compliance, and we're talking big bucks.

But this is still small potatoes compared with the gains in economic growth associated with adopting the FairTax. Over the next few decades, the FairTax would likely raise U.S. GDP by 15% relative to its alternative value. Here's why. The FairTax generates much bigger incentives to work and save. It also redistributes from rich older spenders to younger savers. While it's not widely known, America's biggest spenders are actually the elderly, and for good reason. They know they have fewer years left to spend their resources and, consequently, are consuming their resources at more than twice the rate of the young.

What about the poor, both young and old? Wouldn't they be worse off under the FairTax? No. The FairTax's rebate would leave poor young households paying a zero net sales tax. And it would leave poor elderly households better off thanks to both the rebate and Social Security's automatic adjustment of benefits to any increase in prices.

The FairTax would also relieve the tax burden on middle-class workers. Since the FairTax generates a goodly portion of its revenues by effectively taxing wealth, it can afford to have a lower effective tax on wages.

Is a sales tax the best way to tax consumption? Notwithstanding some enforcement concerns, my answer is yes. The flat tax, propounded by some, purports to tax consumption. But read its fine print or talk to its sponsors. You'll find special transition rules that eliminate any effective taxation of existing wealth, leaving the rich, particularly the rich elderly, completely off the hook. The same simulations showing efficiency gains and enhanced economic growth from consumption taxation, show the reverse from moving to wage taxation. Thus, the flat tax, as it would likely be implemented, is a loser on both economic and moral grounds.

Fundamental tax reform is long overdue. Consumption taxation is the way to go. The FairTax is a reform every Democrat who cares about equity should love. And it's a reform every Republican who cares about efficiency, transparency and growth should champion.

Mr. Kotlikoff, chair of the economics department at Boston University, is co-author of "The Coming Generational Storm," out next month from MIT Press.

Interesting isn't it. You take the view of Kotlikoff from 1996 static distributional analysis based on tax law and projections of that time to bolster your non-arguments.

Interesting, isn't it? I wasn't using Kotlikoff's "1996 static distributional analysis" (I don't even know what that would be), I was using the exact paper you were using which was based on a dynamic model. And when you can't answer my point you post an editorial! LOL!

Kotlikoff himself shows that your "keep all your money while prices drop" BS is just that, a big, stinking pile of BS and you can't even muster a decent reply.

Interesting isn't it. You take the view of Kotlikoff from 1996 static distributional analysis based on tax law and projections of that time to bolster your non-arguments.

Your studies from post #46 were from 1995 and Kotlikoff's 1993...what's your point?

I was using the exact paper you were using which was based on a dynamic model.

I have used Kotlikoff's 2000 Ways and Means testimony for my for my source of information, hardly the exact paper you are refering to.

At least from what you tell us that paper you have and are referring to in great detail is not published by AFFT,

"It's from Kotlikoff's "Replacing the U.S. Federal Tax System with a Retail Sales Tax - Macroeconomic and Distributional Impacts - Report to Americans for Fair Taxation" (which the AFT has chosen not to publish). He models 5 different versions (with/without payroll tax & rebate) and the version that matches the FairTax had the following percentage change in real wage rates: "

Year of
Transition Percent
Change

5 0.13%

10 2.35%

25 6.20%

150 8.00%

This pretty clearly shows that there will be no change in prices relative to wages due to microeconomic effects. The real changes happen when the macroeconomic effects take hold and those take a while to develop and I think those would probably happen with any consumption tax.
350 posted on 04/18/2005 12:37:50 PM MDT by Your Nightmare

Kotlikoff himself shows that your "keep all your money while prices drop" BS is just that, a big, stinking pile of BS and you can't even muster a decent reply.

It would appear you are making reference to a paper you claim is not available to all to check the context of his simulations or price change information. Interesting that you have not shown anything by actually stated by Kotlikoff relating to prices from his paper, you just claim the study somehow supports your view of price changes.

However as you indicate quite clearly, real wages are increased off the baseline of the simulation in the paper you refer to. Seeing that the base year, on which the simulation had to have been calibrated against, had to have been earlier than 1996, there had to have been nominal wage increases to which the NRST referenced above had to add to, your claim of no price decreases without nominal wages going down (in a lower cost environment for business) appears to be a bunch of baloney.

From Kotlikoff's description of his simulation in his Ways and Means Testimony, he makes no mention of taking tax related overhead costs into account in prices, nor does he mention price effects at all. I rather suspect the same is true of the study you are taking your information from especially as his Ways and Means Testmony indicates the Kotlikoff tends to favor tax rates 30% higher than the NRST legislation actually calls for to compensate for his anticipation of additional growth in government spending.

I would say the main BS around here is coming from you, but I will reserve judgement on that one, as regards Kotlikoff's works, until I manage to aquire a copy of his study for perusal to see for myself what his simulation conditions actually are for his NRST rates, and assumptions and implementations of business costing effects with regard to pricing to the consumer.

By the way since you tell us AFT has not published the above report and imply they do not release it to people on request, perhaps you can guide us to your source of the Kotlikoff study so the rest of us can look at the study too.

Or do you find things in there, as is your usual mode, that do not support the negative view of the NRST or the Fair Tax legislation that you would have us all believe it does?

I am particularly interested in what Kotlikoff's paper has to say about inflation or deflation of tax included prices and any changes to the business cycle that he should have provided for in his simulation for it to accurately reflect shelf (i.e. producer) pricing of goods and services to the end consumer.

Your studies from post #46 were from 1995 and Kotlikoff's 1993...what's your point?

Kotlikoff has obviously done additional work in refining his models for retail sales taxes and their effects since '1996, updating for changes in the economy, current tax law and many other effects not in his original studies.

At least from the picture that YN would have us accept, it would appear that Kotlikoff has increased his appreaciation for the potential of the Fair Tax legislation over his initial assessments as indicated in his Wall Street Journal article in post #51.

Something has either changed Kotlikoffs views to a more positive representation, or YN has left out some critical context of the '96 Kotlikoff study that would shed some light as to the difference in tone that Kotlikoff has demonstrated in his current assessment above.

Kotlikoff has obviously done additional work in refining his models for retail sales taxes and their effects since '1996,

But you haven't. You keep rehashing the same old garbage as if it's new....sometimes more than once on the same thread.

YN has left out some critical context of the '96 Kotlikoff study

You aren't paying attention. YN has stated he doesn't know anything about the 96 study...therefore he can't leave anything out...

Nice try though.

YN has stated he doesn't know anything about the 96 study...therefore he can't leave anything out...

YN states very explicit things that are apparently only found in that '96 study per:

"It's from Kotlikoff's "Replacing the U.S. Federal Tax System with a Retail Sales Tax - Macroeconomic and Distributional Impacts - Report to Americans for Fair Taxation" (which the AFT has chosen not to publish). He models 5 different versions (with/without payroll tax & rebate) and the version that matches the FairTax had the following percentage change in real wage rates: "

Year of
Transition Percent
Change

5 0.13%

10 2.35%

25 6.20%

150 8.00%

This pretty clearly shows that there will be no change in prices relative to wages due to microeconomic effects. The real changes happen when the macroeconomic effects take hold and those take a while to develop and I think those would probably happen with any consumption tax.
350 posted on 04/18/2005 12:37:50 PM MDT by Your Nightmare

Are you telling us YN is just pretending to take this from Kotlikoff's '96 study and aren't real results? Or that he is claiming source material he doesn't have?

But you haven't. You keep rehashing the same old garbage as if it's new....sometimes more than once on the same thread.

Obviously because any new works by Kotlikoff do not appear to have reached the internet yet.

I provide material with internet sources where available or current news accounts so everyone can read what source there is in readily available form and see it in the context it exists.

That is why you find I reference Kotlikoff's 2000 Ways and Means committee testimony that can be found on the internet, and his Wall Street Journal article that everyone can easily aquire a copy of to read in local library if they wish to.

Good point, well made.
Sometimes I should not be allowed near a keyboard.

Year of Transition	Percent Change
5	0.13%
10	2.35%
25	6.20%
150	8.00%