tag:blogger.com,1999:blog-5667758136428430114.post9171934261637146341..comments2023-05-27T06:59:49.394-05:00Comments on Freedom Is the Solution: A Tax Cure All?Brian Shelleyhttp://www.blogger.com/profile/01072759016620084338noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-5667758136428430114.post-2617416102511038602007-10-15T23:52:00.000-05:002007-10-15T23:52:00.000-05:00First, keep in mind that prices after FairTax pass...First, keep in mind that <B>prices <I>after FairTax passage</I> would look <I>similar</I> to prices <I>before</I> FairTax - <I>not</I> "30% higher" as opponents contend</B> - competition would see to it. So, the FairTax rate (figured as an income-tax-rate-non-comparative, sales tax) on new items would be 29.85% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" price tag - this is the way INCOME TAX is figured (parts of the total dollar). <BR/><BR/>To address your concerns about "regressivity," the <B>effective tax rate percentages</B>, that different income groups would pay under the FairTax, are calculated by crediting the monthly "prebate" (advance rebate of projected tax on necessities) against total monthly spending of citizen families (1 member and greater, Dept. of HHS poverty-level data; a single person receiving ~$200/mo, a family of four, ~$500/mo, in addition to working earners receiving paychecks with no Federal deductions) <A HREF="http://snipurl.com/kotcomparetaxrates" REL="nofollow">Prof.'s Kotlikoff and Rapson (10/06)</A> concluded,<BR/><BR/><I>"...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.</I><BR/><BR/><I>"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."</I><BR/><BR/>Further, per <A HREF="http://snipurl.com/kotftmacromicro" REL="nofollow">Jokischa and Kotlikoff (circa 2006?)</A> ...<BR/><BR/><I>"...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."</I>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5667758136428430114.post-22675466954956302072007-10-12T15:31:00.000-05:002007-10-12T15:31:00.000-05:00Ian,Good points. I felt rather sheepish after som...Ian,<BR/><BR/>Good points. I felt rather sheepish after someone e-mailed me and explained why enforcing cross border sales would be pretty easy, with the possible exception of jewelry and other small items.<BR/><BR/>I still have some concerns over bleeding hearts lobbying to get certain "necessities" to be tax free. Who would win an argument to eliminate consumption taxes on baby formula? Sure it opens a can of worms, but I can't imagine that it wouldn't pass.<BR/><BR/>I also have some concerns about the perceived regressive nature of the tax. I probably need to do more research, but that was my first reaction to it and I'm guessing for others as well.<BR/><BR/>The links are right on about the fact that international competitiveness will force us to do something as we start to fall behind.Brian Shelleyhttps://www.blogger.com/profile/01072759016620084338noreply@blogger.comtag:blogger.com,1999:blog-5667758136428430114.post-16654729462073985912007-10-12T00:27:00.000-05:002007-10-12T00:27:00.000-05:00As for "crossing borders" to buy big-ticket items:...As for "crossing borders" to buy big-ticket items: Those would bear the tax upon entry into the U.S. All imported goods bear the tax.<BR/><BR/>As for comparable taxes: Right now, based on research by Dale Jorgenson, there exists (on avg) 22% price inflation due to the business costs of complying with income and payroll taxes - higher for some industries, lower for others. Thus, using the average on $10 million, the hidden tax - paid by consumers - is $2.2 million + $350 k paid by the business (which is really passed along to consumers) equals $2.550 mil, or 25.5% of revenues.<BR/><BR/>The effect of the FairTax - because it is revenue neutral - is to "externalize" this embedded tax factor. The business builds collection of the tax into reduced-cost services, and is granted an administrative credit against the tax remittance. Based on page 11, Figure 1 of the <A HREF="http://www.fairtax.org/PDF/PlainEnglishSummary_TheFairTaxAct2007.pdf" REL="nofollow">"plain english summary"</A> of H.R. 25, on $7.8 million in reduced-cost sales, this would amount to $2.33 mil in tax, plus an administrative credit total of ~47,000.<BR/><BR/>So, $2.33 mil + ($47K) = $1.86 mil, or 23.8% of revenues. Keep in mind that the company now has the full use of all of its income, and cheaper costs for doing business. Plus, it isn't punished for hiring people, nor will it have politicians in Washington cutting deals with its competitors - or competing sectors! (Not to mention the money IT will save by not having to pay for lobbyists to protect its interests against tax activism by others - which now accounts for 53% of the lobbyists in Washington!)<BR/><BR/>The FairTax is not only feasible, but <B>URGENT</B>, if one takes to heart the concerns of an <A HREF="http://snipurl.com/meltdowninprogress" REL="nofollow">economic meltdown</A> detailed by Dr. Laurence Kotlikoff. Indeed, the system is uncorrectably corrupt because of invisibility and the lack of political accountability it fosters. Tom Frey, of the DiVinci Institute, foresees the <B><A HREF="http://snipurl.com/incometaxcollapse" REL="nofollow">coming collapse</A></B> of the income tax system.<BR/><BR/>What must be done is that you, and me, must ACT to demand our legislators <A HREF="http://snipurl.com/scrapthecode" REL="nofollow">scrap the tax code</A> and pass the FairTax Act.Anonymousnoreply@blogger.com