Teh stupid, it hurts.

[Red Arrow]

Fair Tax is 30%, not 23%
A $1 Can o' Corn would be $1.30 under that scheme (prior to state & local sales tax)
The BS spin is that 30 cents is 23% of $1.30

Got a link for the claim that the price would be $1.30 instead of $1.23?

State and local sales tax should get on your bandwagon.  Something costing $100.00 should be jacked up to $109.31 instead of $108.52.   $9.31 is 8.517% of $109.31.

[YoungTulsan]

http://www.factcheck.org/taxes/unspinning_the_fairtax.html

Even the FairTax Troy McClure Q & A page admits this 75 pages down...

http://www.fairtax.org/site/PageServer?pagename=about_faq_answers

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.

[swake]

The fact that it makes sense is only partially the reason it will never happen.  Fair or usage based taxes threaten the core modern American politics.  Currently people are not required to acknowledge what their taxes pay for or the amount of tax taken from them every day in the form of payroll taxes.  In fact, most voters are strikingly ignorant of government, its programs, and the amount of money spent.  Many actually view a tax refund as somehow "making money" and actually are willing to brag about the fact that "they got $XXXX from the government this year,"  instead of being embarrassed for miscalculating what they should have been paying.

Fair or usage based taxes force ALL consumers to be tax payers, and the disparity between price and price+tax forces them to be more aware of their government system and the value of what they are paying for.  It also forces politicians to design programs and platforms that provide the best value for the money they will request, instead of burying or embedding expenses. Usage taxes are very visible and changes or fluctuations cannot be manipulated or shifted to other members of the population through thousands of deductions, loopholes, and witholding tricks.

This level of transparency threatens the way our politicians have learned to game the system.  It would cause a mostly ambivalent population to take an unwelcome interest in politics.

Let's look at the math. The top 1% of wage earners earn 20% of the total income earned in the US (and hold 80% of the wealth) and currently will pay an effective tax rate (post tax increase) of about 39%. Currently the bottom 45-50% of tax payers pay little or no income taxes but do pay 17% of their income on payroll taxes.

Under this 23% plan the top tax payers will see their taxes fall almost by half. In 2010 the top 1% paid 37% of all taxes, which should go up with the recent tax increases on the rich. But, if you cut their tax rate by 41% (39% down to 23%) you will lose more than 15% of total revenue. Where is the government going to make up that money? By raising everyone else up to 23%, or 30% or whatever.  Last year the feds got 2.45 Trillion in tax revenue. A 15% cut in federal tax revenue would be cut of $368 billion a year right into the pockets of the wealthiest Americans and that money is going to have to be made up somewhere. 99% of American would be shouldering a $368 billion tax increase.

That would be an increase in taxes of $1,172 per person for every single person in the bottom 99%, every year. How many people you have in your family Gasp? Think about that.

Math is fundamental.

[Gaspar]

Got a link for the claim that the price would be $1.30 instead of $1.23?

State and local sales tax should get on your bandwagon.  Something costing $100.00 should be jacked up to $109.31 instead of $108.52.   $9.31 is 8.517% of $109.31.

The opponents of the fair tax always try to confuse the issue (by using the inclusive method) when comparing Fair tax to Income tax, however sales taxes are always calculated using the "exclusive" method, just as we do today.  So the sales tax (under a fair tax system) would indeed be calculated at 30% at the reatail counter (which is exactly 23% of the income used to pay for such goods and services).

This is how it is explained:
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.

Perhaps the biggest difference between the two is that under the income tax, controlling the amount of tax you pay is a complex nightmare.

So, Fair Tax is a 23% tax as compared to the income tax you pay now, but the biggest difference is that you get to decide wether or not to spend that money, and you cannot avoid paying taxes or take advantage of loopholes, deductions, or other methods to escape tax liability.


The very simplicity of the system is the biggest threat to politicians.

[Red Arrow]

http://www.factcheck.org/taxes/unspinning_the_fairtax.html
Even the FairTax Troy McClure Q & A page admits this 75 pages down...
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers

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.

At least they admit they are playing the semantics game, even if it is on page 75 where no one will look.  I disagree with their logic since income taxes are taken from what you have already made rather than added to what you make.  

It may still be a better deal overall but I would insist on not taxing some items like food, clothing, and prescription drugs.  Determining which items would be tax free would incur some bureaucracy, lobbying and corruption but probably no where near as much as the present system.   A tax pre-bate like some suggest would most likely not reduce the bureaucracy much, if any, since each individual taxpayer's income would still need to be determined.  Additionally, would a pre-bate need to be returned if ones financial condition improved during the year?  Pre-bates would be a whole new tax industry to replace the one we presently love so well.

Edit:
A tax pre-bate for everyone, without means testing, would not last 37 nanoseconds.

[YoungTulsan]

The very simplicity of the system is the biggest threat to politicians.

So simple they didn't use the much simpler you make $130 you keep $100 comparison because it more easily shows people that it is 30% than the 77/23 split.

[Gaspar]

Let's look at the math. The top 1% of wage earners earn 20% of the total income earned in the US (and hold 80% of the wealth) and currently will pay an effective tax rate (post tax increase) of about 39%. Currently the bottom 45-50% of tax payers pay little or no income taxes but do pay 17% of their income on payroll taxes.

Under this 23% plan the top tax payers will see their taxes fall almost by half. In 2010 the top 1% paid 37% of all taxes, which should go up with the recent tax increases on the rich. But, if you cut their tax rate by 41% (39% down to 23%) you will lose more than 15% of total revenue. Where is the government going to make up that money? By raising everyone else up to 23%, or 30% or whatever.  Last year the feds got 2.45 Trillion in tax revenue. A 15% cut in federal tax revenue would be cut of $368 billion a year right into the pockets of the wealthiest Americans and that money is going to have to be made up somewhere. 99% of American would be shouldering a $368 billion tax increase.

That would be an increase in taxes of $1,172 per person for every single person in the bottom 99%, every year. How many people you have in your family Gasp? Think about that.

Math is fundamental.

That would be fairly correct without the prebate.  With the prebate however the scale actually looks like this for the various income groups.
Under the FairTax, all Americans consume what they see as their necessities of life free of tax. While permitting no exemptions, the FairTax (HR25/S122) provides a monthly universal prebate to ensure that each family unit can consume tax free at or beyond the poverty level, with the overall effect of making the FairTax progressive in application. There is no marriage penalty as the couple gets twice the amount that a single adult receives.

While everyone pays the same tax rate at the cash register, the prebate results in effective tax rates (annual taxes paid divided by annual spending) that increase as the level of spending increases a progressive tax rate structure. For example, a person spending at the poverty level has a 0% effective tax rate, whereas someone spending at twice the poverty level has an effective tax rate of 11.5%, and so on.



Additionally:
Most people are paying that much or more today -- much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That's 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in the business taxes and associated compliance costs passed on to consumers in higher prices.

Effective tax rates vs. stated tax rates
Because the 23-percent FairTax rate of $0.23 on every dollar spent is not imposed on necessities, an individual spending $30,000 pays an effective tax rate of only 15.5 percent, not 23 percent. That same individual will pay 17.3 percent of his or her income to federal taxes under current law. See effective tax rates for a family of four at various spending levels in Figure 2.

Math is fundamental.

[swake]

That would be fairly correct without the prebate.  With the prebate however the scale actually looks like this for the various income groups.
Under the FairTax, all Americans consume what they see as their necessities of life free of tax. While permitting no exemptions, the FairTax (HR25/S122) provides a monthly universal prebate to ensure that each family unit can consume tax free at or beyond the poverty level, with the overall effect of making the FairTax progressive in application. There is no marriage penalty as the couple gets twice the amount that a single adult receives.

While everyone pays the same tax rate at the cash register, the prebate results in effective tax rates (annual taxes paid divided by annual spending) that increase as the level of spending increases a progressive tax rate structure. For example, a person spending at the poverty level has a 0% effective tax rate, whereas someone spending at twice the poverty level has an effective tax rate of 11.5%, and so on.



Additionally:
Most people are paying that much or more today -- much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That's 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in the business taxes and associated compliance costs passed on to consumers in higher prices.

Effective tax rates vs. stated tax rates
Because the 23-percent FairTax rate of $0.23 on every dollar spent is not imposed on necessities, an individual spending $30,000 pays an effective tax rate of only 15.5 percent, not 23 percent. That same individual will pay 17.3 percent of his or her income to federal taxes under current law. See effective tax rates for a family of four at various spending levels in Figure 2.

Math is fundamental.

If this is to be revenue neutral and you cut the taxes of the top 1% by 40% which removes 15% of total federal revenue, or whatever cut you give them, the other 99% have to pay more to make up for the loss in revenue. Prebates or not, everyone else is going to have to pay more. It's really simple.

[YoungTulsan]

If this is to be revenue neutral and you cut the taxes of the top 1% by 40% which removes 15% of total federal revenue, or whatever cut you give them, the other 99% have to pay more to make up for the loss in revenue. Prebates or not, everyone else is going to have to pay more. It's really simple.

The super wealthy aren't filling the IRS's coffers with taxes off of wages on a W2 form.  A sales tax would actually ensure that there would be no loophole, trust, charity, whatever to launder wealth around.   You buy something you pay in.  What about capital gains?

[Red Arrow]

Let's look at the math. The top 1% of wage earners earn 20% of the total income earned in the US (and hold 80% of the wealth) and currently will pay an effective tax rate (post tax increase) of about 39%.

What happened to the richest 1% paying a less effective rate than Warren Buffet's secretary?  (Or is WB's secretary better paid than we are led to believe?)

[Gaspar]

If this is to be revenue neutral and you cut the taxes of the top 1% by 40% which removes 15% of total federal revenue, or whatever cut you give them, the other 99% have to pay more to make up for the loss in revenue. Prebates or not, everyone else is going to have to pay more. It's really simple.

Top earners, and businesses will indeed enjoy a lower rate of taxation.  In fact tax payers at all levels will enjoy a lower total effective tax rate, however the revenue generated remains the same, because more taxes will actually be collected.  There are a great many who pay no income tax now.  In fact that is nearly half of the population.  Of the "Top 1%ers" you speak of, many of them are businesses who escape paying taxes in many ways, and others are extremely wealthy people who claim NO annual income or use various shelters and trusts to exempt their income from taxation.  Under a Fair Tax they too would pay taxes on the goods and services they purchased.  There would be no new Mercedes S550 purchased every year under the family trust, without the payment of a 30% sales tax.

Everyone, except those at or below the poverty level, will not only be expected to pay their Fair Share, they will have no way to escape it.

[heironymouspasparagus]

The fact that it makes sense is only partially the reason it will never happen.  Fair or usage based taxes threaten the core modern American politics. 

Interesting how you refer to something as "modern" American that began 100 years ago....

[swake]

What happened to the richest 1% paying a less effective rate than Warren Buffet's secretary?  (Or is WB's secretary better paid than we are led to believe?)

That's not on wages. Romeny's effective tax rate was more like 15% for example due to capital gains and deferments.

His admin making say 60k would pay 17% payroll tax on everything and depending on deductions may 10-15% on most of the rest. Probably an effective total rate of ~30% or something like that.

[swake]

Top earners, and businesses will indeed enjoy a lower rate of taxation.  In fact tax payers at all levels will enjoy a lower total effective tax rate, however the revenue generated remains the same, because more taxes will actually be collected.  There are a great many who pay no income tax now.  In fact that is nearly half of the population.  Of the "Top 1%ers" you speak of, many of them are businesses who escape paying taxes in many ways, and others are extremely wealthy people who claim NO annual income or use various shelters and trusts to exempt their income from taxation.  Under a Fair Tax they too would pay taxes on the goods and services they purchased.  There would be no new Mercedes S550 purchased every year under the family trust, without the payment of a 30% sales tax.

Everyone, except those at or below the poverty level, will not only be expected to pay their Fair Share, they will have no way to escape it.

Who will those "more taxes" be collected from? The great many who pay nothing still pay payroll taxes and the bottom 50% of earners only make something like 20% of the money in the US. There's not a lot there to take. If you give the rich back more money, someone has to make up for it.

[Gaspar]

Who will those "more taxes" be collected from? The great many who pay nothing still pay payroll taxes and the bottom 50% of earners only make something like 20% of the money in the US. There's not a lot there to take. If you give the rich back more money, someone has to make up for it.

You don't get it.