For myself, I'm willing to go through ANYTHING to shove a "dagger in the heart" (Chuckie Schumer's favorite phrase, BTW) of THE OLD INCOME TAX for the sake of my kids, grandkids and the future of this great country of ours, in case things don't work out quite the way it's hoped (Do you want a COMPLETELY ACCURATE crystal ball? WTFKOFAYA?) Whatever, it will kick the American economy into hyper-overdrive within 2 years if not sooner, and I'm not so mean-spirited as to put everyone else through more hell just so I won't have to suffer that long.
So when I go to the store to buy a $100 coat, will I now have to pay $123? The short answer is, No. The longer answer is also No, but it depends on what exactly you mean by the question. If you're asking whether a $100 coat you see for sale before passage of the FairTax Plan will cost $123 under the Plan, the answer is no because -- as you'll remember from previous chapters -- that $100 price is already inflated by 22 percent worth of embedded tax. Once those embedded taxes fall away, the 23 percent FairTax will bring the price right back to the $100 level. If you're asking whether a $100 coat you see for sale after passage of the FairTax will actually set you back $123, the answer is no because the FairTax was designed as what's called an "inclusive" tax -- that is, the tax is included in the list price of the product. When you go to the store and purchase an item for $100, in other words, the retailer will get $77; the remaining $23 is paid to the federal government. This is the biggest difference between the FairTax and most current state sales taxes, which are "exclusive" -- that is, added to the price of the merchandise at the time of the sale. Since our current income taxes are figured on an inclusive basis -- that is, they are taken out of our paychecks, not added to them -- it was decided to handle the sales tax in exactly the same manner. -- "Questions and Objections," The FairTax Book, pages 150-151 |
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That's because the coat will cost you $130, not $123.
When viewed from the exclusive rate, which is how sales taxes are charged and how this question is framed, the FairTax rate is 30%, not 23% (which is the inclusive rate.)
And that's part of the point: we certainly want people to understand the huge bite that taxes take out of our economy, and seeing a 30% national retail sales tax will certainly get some attention.
(I am in favor of replacing our income tax scheme with a national retail sales tax, but the FairTax has provisions that I don't care that much for. I can support it and I do since it is still far better than the income tax, but I would much rather see a NRST without a prebate. I think the rate could be far lower than 30% if that were to occur.)
As to some sort of general deflation occuring if we were to remove the income tax (which is what the article is suggesting), that's not likely --- I hope. Deflation, as the Japanese can tell you, and our ancestors could also, isn't all cakes and tea.
Pricing isn't a direct function of seller costs; seller's costs do have some bearing since they set a rough sort of floor, but prices are what the market will bear, not what it costs a producer. If prices were simply based on producer costs, all major brand breakfast cereals would cost far less... ;-)
Boortz was even forced to do a (half-hearted) retraction as a result of robfromga's findings.