Posted on 03/06/2005 3:07:44 PM PST by smokeyb
PRICES UNDER FAIRTAX WILL NOT GO UP - JUST THE OPPOSITE
Within months of the start of FairTax you will see your cost at the register WITH your tax the same or lower than the cost today without the tax...here's how....
EXAMPLE: ACME TIE MANUFACTURING CO.- $20 tie - $5 profit margin
Today's Economy -$20 price of tie at purchase - no "visible" federal tax
Acme's price formula for a $5 profit margin on the sale (today under income tax):
$2 material
$8 labor
$5 IRS tax compliance costs of 25% Acme pays and passes on to consumer
$5 profit margin for Acme
$20 retail cost for the tie to YOU the consumer ( no visible Natl Tax to you but clearly you the consumer are paying Acme's $5 IRS tax costs for them and Acme makes $5 in the transaction)
NOW THE FAIR TAX:
Acme Tie Manufacturing under FairTax - SAME $5 PROFIT MARGIN
$2. material
$8 labor
0 IRS tax compliance costs to Acme
$5 profit margin for Acme
$15 cost of tie at retail - Acme receives the same $5 profit and is happy and they have NO taxes to pay to the IRS
BUT the consumer also pays the same $20 for the tie as before...the price does not go up.....see here's what your sales receipt would say under FairTax
Consumer costs under FairTax:
$15 tie at retail
+$5 - 30% natl retail sales tax (FairTax on new goods and services)
$20 cost to consumer for the tie (exactly the same as before but is it really?
As you can see under the current system or the FairTax, in this example Acme gets the same $5 profit, and the consumer pays the same $20 for the tie..but what has really been gained, what is different?
1. The consumer sees the cost of big government on his sales receipt, namely the $5 FairTax, a tax which he paid in the first example but was not aware of since it was hidden in the price - it's called honesty and 100% visibility in the cost of Big Government!
2. Acme can now broaden their base of sales at $15 to compete with the tax free Singapore Tie Company who has been selling their ties in the USA for $15 all along. FairTax now creates a better balance of trade and the ability for the American firm Acme to also go abroad with their ties and export them at $15. This will create Acme expansion including creating more American jobs available. Factory expansion means Labor becomes a commodity to compete for so salaries and benefits go up for everyone.
3. The ability for Mr NeckTie to open a factory and sell ties for $15 if Acme refuses to lower their price to $15 after IRS costs are removed from them. Or perhaps Mr NeckTie will be happy with a $4 profit margin and sell his ties for $14 creating a little price war that the consumer benefits from..Don't worry Acme & Mr NeckTie won't be working together to bring the price up to $17, cause there is always another American with the willingness to work hard and step into the market at $14 a tie, its called American ingenuity and the free market system. A little competition goes a long way.
4. Don't forget! The consumer can go to the flee market and buy a used tie and pay NO tax at all, lowering their costs to live and lowering their overall net effective tax rate under FairTax. You can't do that in today's tax system, since everything you purchase today is done with "after tax dollars".
All's right with the world, everything is honest, above board, fair, and you can now buy Dad that tie on Father's day for less money than you did before.
That's what's called personal liberty and free enterprise
go to www.pafairtax.org/calc.php and see what FairTax will do to your current tax rate. The new HHS rebate numbers are now included in the calculation.
I like the "fair tax," IF the 16th is repealed.
If the 16th is NOT repealed, an income tax WILL return. Then we will have both.
Today's Economy -$20 price of tie at purchase - no "visible" federal taxAcme's price formula for a $5 profit margin on the sale
(today under income tax):
$2 material
$8 labor
$5 IRS tax compliance costs of 25% Acme pays and
passes on to consumer
$5 profit margin for Acme
LOL! ...How do you know?
$5.00 profit at 30% tax is $1.50 tax
Employer FICA (7.65%)on $8.00 wage is $0.61
Total possible federal tax $2.10
$20.00 minus $2.10 (price reduction) = $17.90
$17.90 plus 30% federal "gross payment" tax (fairtax) = $23.27 or a 16.35% price increase.
However if your state has a sales tax...
$17.90 plus 7% state sales tax = $19.15
$19.15 plus 30% (gross payment) tax = $24.87.
I'm not convinced that this plan works as presented, so am not ready to sell it to others. I'm telling you though, you have a huge hurdle to overcome in trying to convince most people that exempting business from taxes is smart economics.
Everything except the final, new, retail sale is exempt. Used goods would be exempt, as would b2b transactions.
Mark
If I'm reading this correctly, the 5 bucks "profit" is the net, after tax profit. The IRS compliance includes bookkeeping, tax prep & Federal tax liability.
From the look of things, your "corrected" numbers are not correct either.
Thank you, someone else already answered that for me.
So how are you gonna sell Lunchbox Joe that exempting business isn't screwing him over somehow? Bet he tells you his rate could be cut if business was forced to pay it's "fair share".
I'm not terribly thrilled to consider more focused audits. My state's tax people are already worse than the IRS.
It taxes everything one time only.
In my personal situation, untrue. As I spend my savings, I will be getting taxed *again*. Any kind of transition planned, for the small percentage of people like me?
If I'm reading this correctly, the 5 bucks "profit" is the net, after tax profit.
The net profit was 20%? Not impossible but not likely either. That would make the gross profit more than 20%. How much was the gross profit? How much overhead?
The IRS compliance includes bookkeeping,
Bookkeeping won't be eliminated...Businesses will always keep books.
tax prep
Turbo Tax...$80.00 for the year.
& Federal tax liability.
I addressed that....$ 2.10 plus $0.61 FICA even though employer FICA is iffy.
From the look of things,
"If" you're reading this correctly.
your "corrected" numbers are not correct either.
They're more correct than his but you're welcome to correct mine or try your own as well.
The current income tax is more like a VAT than the proposed NRST under the Fair Tax Act.
Like a VAT, income taxes are assessed on businesses and consumers at every level of production. Currently, every drop of sweat, every minute of time , every brain fart required to produce, transport, and sell a product or service is taxed according IRS code and FICA.
The NRST under the Fair Tax Act will be assessed once, at the final point of resale, and only on new goods.
Even under the current income tax, when you spend your savings, you are being taxed again. Over 30% of the cost of everything you buy now is to cover the business income tax and individual income tax on all the efforts required to produce, transport, and sell the item.
You mean that you actually give some money to do that to your hair? LOL
Sorry, I couldn't resist that.
Yes, your haircut will be taxable. Except for savings and education, everything is taxable that is new.
Now, before you get to excited, take a look at the process.
1] You now have your entire paycheck. Anywhere from 15 to 50 more than in your last check depending on your income and tax bracket under the old system.
2] You will recieve a monthly rebate to cover the taxes on all of spending up to the poverty level for your family size.
3] The cost to the barber is now lower. If the barber is self employed, his self employment taxes alone just went down 15% as will many other tax costs and compliance costs along the way, so likely, he can charge less for the haircut, but even if he doesn't, your ability to pay the same price plus tax was not negatively affected. If he does lower the price (which makes more sense in the real world) there will likely be little differnce in the total price before and after the change in tax structure.
I agree totally, but allow me to ask you this. . .
How do you do that when about 40% of people are legally exempted from the income tax, another 10% or so have exempted themselves, and it's only 'rich guys like you' that pay taxes, why would any of them want to cut government spending? As long as you're buying lunch, they don't care what it costs. That's the problem we face.
If we get over half of voters as non taxpayers, how will we ever get them to change things in DC?
Like you, we are not cranky all the time, but can get cranky and even get a bit arrogant when people ignore the plain facts of the proposal and the plain language explanations that have been presented ad infinitum. There is nothing devious or deceptive about this bill.
If you won't accept our definitions and explanations, what will it take to convince you?
The net profit was 20%? Not impossible but not likely either. That would make the gross profit more than 20%.
I found this little abbreviated operating statement interesting, cuz it tried using a manufacturing company, as opposed to say, a retail store or a profession, like a dentist office. Each & every kind of animal has different expectations in the ratios.
I was looking for a chart of standard percentages for any kind of business, but grew tired of the exercise. From experience & memory, I'd have to say that 25%, no way, er, even less likely than 20%.
How much was the gross profit?
Unknown & can not be calculated from the example given, less they were trying to tell us it was that 25%. First question I wanna ask about Acme, what kind of business is it, sole-proprietorship, corporation, sub S?
How much overhead?
None?
The IRS compliance includes bookkeeping, Bookkeeping won't be eliminated...Businesses will always keep books.
Correct, though it would be covered under overhead, which looks to be a freeby in our example, cept where we gotta fess up to the IRS, at which point, it costs more than materials, I think. tax prep Turbo Tax...$80.00 for the year.
I never used it, so do not know what it is capable of handling. Does it handle different depreciation schedules?Before any of the "fair tax" sellers round here jump on me about that question, I realize it would not apply under the fair tax plan.
& Federal tax liability. I addressed that....$ 2.10 plus $0.61 FICA even though employer FICA is iffy.
Here's one of the places where comparing the different plans starts getting more complicated. Most of the non-included overhead items will add in more "hidden" tax, as will non-included direct costs. For example, if you use a subcontractor, a portion of what you will be charged will be the Federal tax that they have had to pay. The writer of our original example failed to reduce the cost of materials, which should be theoretically true if fair tax works the way they say it's supposed to work.
From the look of things, "If" you're reading this correctly.
Your "corrected" numbers are not correct either. They're more correct than his but you're welcome to correct mine or try your own as well.
While your numbers are more correct, this is neither horseshoes, nor hand grenades.
They say millions has been put into creating this proposal, I'd have to think a portion of that went into some serious number crunching. Course, there's no way for me to tell that, from the example laid out in the first post of this thread.
$19.15 plus 30% (gross payment) tax = $24.87.
Why do continue to lie? There is no FairTax on the state tax. This has been shown to you over and over again.
If you are ever going to have any credibility, you will have to admit when you are wrong and it's been proven publicly. Otherwise, you will be thought of as poorly as that lewislynn fellow.
Oh, that is you, lewislynn. I should have known. Never mind.
I realize that, which is why I didn't immediately blow this proposal off. I'm willing to be taxed in the unfair manner this proposal creates for me, but not if it takes away my freedom & forces me to go back into the working world again.
You've posed 2 good questions, but I'm getting a bit tired. It's 4:30 AM and need to get some sleep. I will get back to you tomorrow, or rather later this morning, but I'm sure someone else will answer before I get back. But when I'm done explaining it, you gotta be ready to work. ;-)
If the 16th is NOT repealed, an income tax WILL return. Then we will have both.
A separate bill is required and has been sponsored to repeal the 16th Amendment. HR25 calls for disbanding the IRS.
The below will happen when the FairTax is implemented regardless of the repeal of the 16th amendment.
Once the FairTax is passed and implemented it's a huge wake-up call for the people and politicians. The change is a one-way street. There will be no turning back. Momentum will carry over to major reductions in government spending and ousting parasitical elites at all levels of government.
Jeez, we could be just like them. / sarcasm
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