“For instance, if you buy a $100 coat under the FairTax regime, you will pay a total of $129.87 with FairTax included, not $123.”
That is completely wrong. You either haven’t read the Fair Tax plan (or the book that explains it) or you are deliberately misrepresenting it.
My computations are correct. You can also reference the FairTax FAQ #47 on this very subject:
30 percent. This issue is often confusing, so we explain more here.
When income tax rates are quoted, economists call that a tax-inclusive quote: "I paid 23 percent last year."; For every $100 earned, $23 went to Uncle Sam. Or, "I had to make $130 to have $100 to spend."; That's a 23-percent tax-inclusive rate.
We choose to compare the FairTax to income taxes, quoting the rate the same way, because the FairTax replaces such taxes. That rate is 23 percent.
Sales taxes, on the other hand, are generally quoted tax-exclusive: "I bought a $77 shirt and had to pay that same $23 in sales tax." This is a 30-percent sales tax. Or, "I spent a dollar, 77 cents for the product and 23 cents in tax." This rate, when programmed into a point-of-purchase terminal, is 30 percent.
Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.
Spend that same $100 under a sales tax, you pay that same tax of $30, and the rate is quoted as 30 percent.
Perhaps the biggest difference between the two is under the income tax, controlling the amount of tax you pay is a complex nightmare. Under the FairTax, you may simply choose not to spend, or to spend less.
(I had to reformat the cents character to the word 'cents' since Free Republic's software was rewriting this to a series of nonsense characters.)
You can also reference the tax computation made in the document FairTax Fundamentals and Facts on page #10:
| Component of housing cost | Current law | FairTax |
|---|---|---|
| Home purchase price | $230,000 | $230,000 |
| Mortgage interest rate | 6.6% | 4.95% |
| Interest at rate above for 30 years | $298,806 | $211,962 |
| Federal taxes | $104,854 | $69,000 |
| Income taxes on principal | $64,400 | $0 |
| Payroll taxes on principal | $17,595 | $0 |
| Income taxes on interest | $0 | $0 |
| Payroll taxes on interest | $22,859 | $0 |
| FairTax on home purchase price | $0 | $69,000 |
| Total housing cost including taxes | $633,660 | $510,962 |
| Difference in total housing costs | -19.4% |
(Reformatted since the original formatting didn't preserve well with < pre > tags.)
Note that the FairTax is $69,000, which 30% of the $230,000 purchase price, not 23%.
Finally, you can read the actual legislation at the Library of Congress (the least clear of all of the methods, although the origin of my own initial discovery of the 23% being an inclusive rate, not an exclusive one):
SEC. 101. IMPOSITION OF SALES TAX.
(a) In General- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services.
(b) Rate-
(1) FOR 2009- In the calendar year 2009, the rate of tax is 23 percent of the gross payments for the taxable property or service.
"Gross payments" are the complete payment with tax included.