Where are you getting 30%??
The bill states its a 23 percent sales tax.. not 30. Talk about deceptive :2razz:
Check out their website. This is another deceptive marketing ploy. They propose a 30% tax. They call it a 23% tax, but that is the rate the Govt receives on the sale of a good after the tax is added.
Item cost 100. 30 percent tax makes it $130. The Govt receives 30/130 = 23%. Talk about deceptive, eh? :2razz: back.
Iriemon: I'm not saying that a partial type of sales tax might not have some arguments in its favor. My principal objection to the fairtax as its proponents propose it is that it will shift the tax burden from the wealthiest, because under the fairtax, investments and returns on investments are exempt from tax. If you can afford to save, you don't pay taxes on that because it is not a taxable transaction. It is generally the wealthier that can afford to save because they generally have more disposable income and can afford it.
Yes.. generally the wealthy that can afford to save... NOW. Under this system those other than the wealthy will be able to afford to save. Thats the part of the point. They will have MORE of an ability to save, because they will have more of the money THEY EARNED in their paycheck. The cost of products they purchase will be nearly the same, because they will not have the embedded tax cost in them, but the added 23% federal sales tax.
More deception. What is that "embedded" tax (they frequently call it a "hidden tax") in the cost of goods sold? See if you can find a detailed explanation of what this hidden tax is, and exactly how by removing the current income taxes that will reduce the price of goods. I've studied their website and read their book, and never saw such an explanation, other than an assertion that it exists and somehow will magically disappear when the income taxes are eliminated.
The embedded tax cannot be a federal sales tax, because there is no federal sales tax. 85% of federal tax revenues are
income taxes (the income and FICA taxes). How is removing an income tax going to cause the price of goods to fall?
The FT folks get the concept of this "embedded" tax from economists that income taxes for a hidden
cost in the price of goods, on the theory that we are paid higher salaries because of this income tax on our wages. Their contention is that by removing the income tax, we'd all get paid less. If by removing the income taxes, our incomes are the same as our current
after tax income, the reduced cost of labor would translate into lower prices.
An explanation from Wiki:
Retail prices are inflated due to embedded taxes and compliance costs passed to the consumer by producers and suppliers. John Linder states the FairTax would eliminate almost all federal taxation costs from the supply chain, which could lower production costs by up to 30%.[47] Americans For Fair Taxation has claimed that the production cost of domestic goods and services could decrease by approximately 22% on average after embedded taxes and compliance costs were removed, leaving the sale nearly the same after taxes.[22] This is based on a study conducted by Dr. Dale Jorgensen, who found that producer prices would drop between 15% and 26% (depending on the type of good/service) after the switch to a consumption based tax.[3] However, Jorgenson's research included all income and payroll taxes regardless of whether they were paid by employees or employers in the 22% embedded tax estimation. (It is also important to note that the Jorgenson model did not capture any reduction in the cost of compliance associated with changing from a complex income tax system to a simpler consumption tax.)
This means that Jorgenson assumed that businesses would pass on all the cost savings from the repeal of payroll taxes and income tax withholding to consumers in the form of lower prices. Mathematically, this would have to result in employee take-home pay (net income) remaining unchanged from pre-FairTax levels.[2][61]
FairTax - Wikipedia, the free encyclopedia
Either that, or we will get the same salaries, there will be no corresponding savings on labor costs (ie the embedded cost), and thus prices will rise along with the
30% tax.
Well, its actually a few hundred dollars if your talking monthly. And how does it not help those in the "bottom rungs" by giving them money to cover the cost of the tax they will have to pay on items that they require to live? If the prices of the goods are near the same level that they are now, due to the removal of embedded tax costs, and then addition of 23% sales tax, making the products nearly the same cost. Again, your forgetting about the fact that products will cost within pennies of what they cost now, due to embedded tax costs in the products today.
The bottom rung doesn't pay federal income tax, so there is no savings to them. The rebate washes out the fact they don't pay income taxes.
As for the claim that prices won't rise, see above.
Positive. A guy making a million and saving $500k will pay a tax on purchases equivalent to half the sales tax, or an effective tax of 15% of his income.
The guy making $100k and spending all of it gets maybe $6k on the rebate. He pays $30k in taxes on purchases, gets $6k and thus his effective tax is 24%.
Negative. Everyone will benefit. Especially when the boost in the economy adds to the mix and unemployment rates drop significantly. Then only those who are too lazy to work will not have a job opportunity.
I agree they make wild and unsubstantiated claims about how the economy will grow with their system. Easy to claim. European nations generally have sales taxes already. But you don't see their economies growing 10% a year.
The only issue I have is the question of how the tax is applied to new vehicle vs. used vehicle purchases, and new homes vs. older home purchases.
Big issue. You pay a 30% penalty to buying new. What do you reckon the effect of that will be on purchases of new items versus used items? What will the effect of that be on the economy?
Of course, with the fact that you misrepresented the sales tax percentage and all your arguments were based off of the false thought that the price of goods would go up instead of stay the same, I think I'll wait for someone else to answer that question
Check it out yourself as to whether I am misrepresenting it.
Buried in the fairtax FAQ
FairTax.org - Frequently Asked Questions Answers #47 they say this:
I know the FairTax rate is 23 percent when compared to current income and Social Security rate quotes. What is the rate of the sales tax at the retail counter?
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¢ for the product and 23¢ 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.
Then they give you a little table supposedly showing the difference:
Current system
You earn: $100
You keep: $77
Your income tax rate: 23%
Gov’t Keeps: $23
Fairtax plan
Your earn: $100
You keep: $100
Choose to Spend: $77
FairTax rate: 30%
Gov’t Keeps: $23
When you look at this chart, you think Wow! With the fair tax, I keep all my money. I can spend the same, and I’ll have an extra $23, and the Govt gets the same tax revenue! Amazing! What a great idea!
But here's the little trick -- if you spend $77 with the Fairtax system, the tax is included in that $77 as a 23% internal tax (ie the tax is 23% of the price). Therefore, the Gov’t only gets .23 x $77 = $17.71. You’d have to spend the entire $100 for the Govt to get the 23% tax.
Cute, eh?
Plus, the implication is that the $77 you spend gets you same amount of stuff as the $77 you spend now, which ignores the fact that with the Fairtax there is a 23% sale tax embedded in the price, so you are really only getting $77-23%=$60 worth of stuff. With that 23% tax you’d have to spend $100 to get the same amount of stuff ($100-23%=$100-$23=$77). You essentially end up in the same place as before. But those that can afford to save pay less taxes.
