Skip to comments.Taxing Sales under the FairTax – What Rate Works?
Posted on 10/19/2006 5:11:50 PM PDT by pigdog
As specified in Congressional bill H.R. 25/S. 25, the FairTax is a proposal to replace the federal personal income tax, corporate income tax, payroll (FICA) tax, capital gains, alternative minimum, self-employment, and estate and gifts taxes with a single-rate federal retail sales tax. The FairTax also provides a prebate to each household based on its demographic composition. The prebate is set to ensure that households pay no taxes net on spending up to the poverty level.
Bill Gale (2005) and the Presidents Advisory Panel on Federal Tax Reform (2005) suggest that the effective (tax inclusive) tax rate needed to implement H.R. 25 is far higher than the proposed 23% rate. This study, which builds on Gales (2005) analysis, shows that a 23% rate is eminently feasible and suggests why Gale and the Tax Panel reached the opposite conclusion.
This paper begins by projecting the FairTaxs 2007 tax base net of its rebate. Next it calculates the tax rate needed to maintain the real levels of federal and state spending under the FairTax. It then determines if an effective rate of 23% would be sufficient to fund 2007 estimated spending or if not, the amount by which non-Social Security federal expenditures would need to be reduced. Finally, it shows that the FairTax imposes no additional real fiscal burdens on state and local government, notwithstanding the requirement that such governments pay the FairTax when they purchase goods and services.
(Excerpt) Read more at people.bu.edu ...
The upshot of the paper is that a 23% tax inclusive rate is sufficient to maintain revenue neutrality even though the paper is a static analysis only, meaning that it does not take into account the many benefits of the FairTax for the U. S. economy and most of its taxpayers.
An excellent article by several well-respected economists - and very much worth the study ...
Hong Kong did well under a 15% tax rate, but it is a city , not a large country.
Except the paper still fraudulantly insists that governments can raise money by taxing themselves. The report also states that state governments will have to raise their tax rates to make up for the additional revenues because of the taxes imposed on the states. Not a honest third party analysis, but an analysis by a paid for fairtax shill.
It doesn't matter what the rate is. The point is that if it is a sales tax people will be constantly reminded of what their real tax rate is. From this they can make education decisions when they vote.
Whatever it might start out at, my guess is that it will steady out at around 15%.
"Why hasn't anybody thought of this before?"Excellent question ... and I really don't know but it's been "thought of" now - and in fact been extensively and intensively studied by a number of economists of which these are a few.
But to answer you oher questions ... YES, that's just what it means.
In fact, it is the most thoroughly studied and reviewed tax bill ever put before Congress.
Your post is merely nonsense and utter gibberish and merely indicates you either haven't read or don't understand the paper (or both).
Best damn B$ they can buy... again.
You can't dispute anything, but you do win the award for posting the first personal attack on this thread. Shocking, I tell ya....
"The problem is spending."
Indeed, ONE problem is spending, but spending by itself accomplishes very little (and hasn't for almost 100 years now) and if spending were reduced it would vault right back up there since he pols can hide and play games with the reams and reams of arcane tax laws under the present system. It is the taxing system that must first be changed or reducing spending is hollow indeed.
I suggest you read the paper with understanding and realize that the income tax, its laws, its people (the IRS) and its records are ALL eliminated by the FairTax. With enough votes to pass the FairTax there will certainly be enough to retain it - especially as taxpayers realize how it reduces their effective tax rate.
In addition, the FairTax calls for the repeal of the 16th amendment. With the FairTax in place if we as voters let the government get by with the present out of control spending habits we deserve what will indeed happen.
A very good analogy. Never heard it put that way, but dead on. The #1 problem by far is most definitely runaway spending.
"... you do win the award for posting the first personal attack on this thread. Shocking, I tell ya ..."
Sorry, but no - your #5 has that "distinction" and there'll no doubt soon be more from you considering your posting habits.
No kidding. The last time any politician talked about the Balanced Budget Amendment was 1994.
(Outside the incessant whining about personal attacks)
There is absolutely no reason the HK system wouldn't work here - if not even better.
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