Basically an eye-opener showing us just how bad we're taking it in the shorts through seen and 'unseen' taxes!
Thanks for the ping geezer.
"The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral."
Basically an eye-opener showing us just how bad we're taking it in the shorts through seen and 'unseen' taxes!
We are taking in the shorts that is for sure, even if the JCT that owes it very existence and purpose to that sameInternal Revenue Code that would be repealed under HR25, just adjusted their assumptions in favor of maintaining the status quo, hidden taxes and all.
==> Title 26 Internal Revenue Code Subtitle G - The Joint Committe on Taxation.
Prepared for Americans For Fair TaxationPrepared for Americans For Fair Taxation This report responds to Ken Kies letter to Chairman Archer of January 12, 1998. In his letter Mr. Kies propounds several objections to the Americans for Fair Taxation (AFFT) FairTax plan (FairTax) as raised by the Joint Committee on Taxation (JCT) staff. This memorandum addresses those objections with respect to three basic issue areas. They are:
I. The Revenue Neutral Rate The JCT, through Mr. Kies letter, posits that the FairTax would be revenue neutral only at a 30 percent tax-inclusive rate and a 42 percent tax-exclusive rate, and possibly higher (if other factors are considered (see pages 1-2)).
However, the JCT estimate goes against the weight of authority and is difficult to explain on analytical bases. Not only AFFT but many highly regarded researchers disagree with the JCTs opinion. For example, Dale Jorgenson (Harvard) has found that the AFFT plan is revenue neutral at 22.9 percent.1 Jim Poterba (MIT) has found that the AFFT plan is revenue neutral at 23.1 percent.2 Laurence Kotlikoff (Boston University) found that the revenue neutral tax rate was 24 percent.3 Researchers at Stanford, the Heritage Foundation, Fiscal Associates and the Cato Institute have reached similar conclusions (22.3 percent to 24 percent). This memorandum demonstrates why the JCT analysis is incorrect and why the Jorgenson, Poterba and AFFT analyses that the AFFT plan is revenue neutral at an approximately 23 percent tax-inclusive rate. A. From a Macroeconomic Perspective, the JCT Calculation of the Rate Is Substantially in Error.
One way of viewing the revenue neutral rate needed under the FairTax replacement plan is to consider the effective rate to be equivalent to the following: Federal Taxes That Must Be Raised / GDP The proportion of the taxes raised under the FairTax should bear the same ratio to GDP as the taxes to be replaced by the FairTax bear to GDP. To arrive at our numerator, the taxes to be raised are the AFFT-repealed taxes; namely, the payroll taxes, income taxes, self-employment taxes, corporate income taxes, capital gains taxes and transfer taxes (death and gift). These replaced taxes, for fiscal year 1998, account for 17.8 percent of GDP. 4 That is because Federal receipts, as a percentage of GDP, are approximately 19.1 percent, and the FairTax plan would repeal 93 percent of current federal taxes and fees. 5 As for the denominator, since investment accounts for 14.6 percent of GDP, the FairTax base can be estimated to be about 85.4 percent of GDP.6 17.8 percent divided by 0.854 is 20.8 percent, the required revenue neutral AFFT tax rate (before the rebate is considered).7 From this aerial view, the conclusion reached by the JCT is clearly off target. In order for the JCTs 30 percent tax-inclusive rate to be correct, the AFFT tax base would need to fall to 59 percent of GDP. In other words, the correct base would be about 31 percent less than the base we estimate. Likewise, in order for the JCTs 42 percent tax-exclusive rate to be right, the AFFT tax base would need to fall to 42 percent of GDP.8 B. Detailed Analyses:
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And continues for another 36 pages of detailed analysis of errors both factual and procedural of the JCT "analysis".