Figuring "fair" tax?

It is calculated sneakily!
When a $1.00 item is sold it rings uyp as $1.23, then the 23% tax is applied to the $1.23. making the tax $.28.
$1.00 plus $.28 equals a total of $1.28.
That is 28% tax!
There also is no guarantee that it will stay at 28%!
It is simply a way to reduce taxes for high wage earners and corporations, and charge the rest more who earn above the poverty level. Even many of them depending upon the "rebate."

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Submitted by ih2005 on Tue, 01/08/2008 - 9:11pm.

Economist Dale Jorgensen, Harvard University, was commissioned to find out what portion of current prices were represented by costs for complying with the federal income tax code (i.e., embedded tax costs). He concluded that 22% (average) of every retail dollar, spent by consumers, constituted a price-embedded tax. Thus, in addition to individual income tax and FICA withholding, individuals are unwittingly paying these unseen, embedded business tax costs with every purchase of a new product, or service.

Under FairTax, prices would fall, due to removal of embedded business tax-related costs. Concurrently, wages may rise due to a mix of factors, including reversion of withheld pay (or some portion thereof) to employees, advancement opportunities due to business expansion resulting from retained earnings, and/or increased demand for labor accompanying increased competition (from that expansion). Where profits (or wages) appear lucrative, competition will move into the market space, driving out excesses (immediately present after FairTax is enacted), arriving at new "market-adjusted" prices.

For FairTax to constitute 23% of new transaction cost (i.e., "market-adjusted" price plus FairTax), a mark-up of 29.9% (tax exclusive rate) on the new "market-adjusted" price is necessary. (Before balking, consider what we're paying now if income tax rates are converted to tax-exclusive sales tax rates on net income instead of percentage of gross income. The following figures can be compared to the 29.9% FairTax mark-up: Fifteen pct bracket = 17.6%, twenty-five pct bracket = 33.3%, twenty-eight pct bracket = 38.9% (! really), and thirty-five pct bracket = 53.8% (! that's how bad it is).

In order to make FairTax a progressive consumption tax (such as that recently called for by Warren Buffett), all citizen-families are simply sent a monthly consumption [tax] allowance, called a "prebate." This prebate is intended to reimburse taxes on necessities for every citizen family without need for record-keeping or reporting. Moreover, the direct payment bypasses the creation of a tax code specifying exempted products and services around which a lobbyist industry could grow. The amount is variable, based on family size, and is equal to the FairTax rate on poverty-level spending, as defined by the Dept. of Commerce. At present, a family of one would receive ~$200/month, a family of four, ~$500/month. Thus, the "effective" FairTax rate paid by citizens, will *never* equal the full 23%. Of course, U.S. visitors (legal, and illegal) will pay the full FairTax when they purchase anything new, at retail (used are not taxed again). Under FairTax, working families will have their whole paychecks (minus any state or local income tax withholding) plus their monthly family prebate.

Additionally, citizens will no longer have to spend the average 50 hours per year preparing their federal tax returns. Having more monthly income may result in using credit less, and saving more. Larger savings will make it easier to purchase a home, at a lower interest rate and monthly payment. (Thus, mortgage deductions are no longer applicable when income is not the basis for taxation).

The current income-based tax system is more expensive to run, because of the manner in which the tax code is gamed by politicians and lobbyists. Politicians realize great power, and attract constituencies for support, by granting tax favors (i.e., credits, deductions, exemptions) through lobbyists. Fully, fifty-three percent of Washington lobbyists are there because of the tax code! The tax code is continually changing, making it more complex - more difficult to understand. And, the salaries and costs of tax lawyers and lobbyists end up in higher prices of the products and services we buy. Additionally, the time and money required to keep records, file returns, report for audits, retain accounting and legal help, pay IRS penalties and interest, is time and money lost for other productive, or recreational, activities. Depriving us of the use of withheld wages increases our expenses through zero-interest withholding, inflation, return preparation time, and interest paid on credit cards and loans that otherwise may not have been necessary. Summed up, the cost of tax compliance, nationally, has been estimated to range anywhere from $265 billion to twice that amount, depending on the extent to which tax-avoidance consultation is sought and utilized. These expenses constitute a substantial hidden tax which is incomprehensible to the average working American. And the FairTax gets rid of all of it for most Americans, and most of it for business owners.

We, as FairTax advocates, believe that government should serve We, the People, with a fair tax system that will not enable politicians to pit poor against rich (creating barriers to achieve wealth, adding tax penalty to the sacrifices made for personal success). Nor do we want politicians to continue using business as a tool to hide taxes from consumers, often villifying business, which discourages entrepreneuship, personal achievement, economic growth. Liberty and happiness depends on restoring the fruits of labor to those who produce them. We believe that the tax function should align with economic growth, not against it, that government should be paid for in the same manner as working Americans - when, and because, something is sold!

As things stand at present, the system primarily benefits politicans who cater to special interests through lobbyists who game the tax code. The politician seeks to capture them as constituent voting blocks, dependent on continued syphoning of taxpayer dollars to their members' benefit. This is increasingly repugnant to the average working American who often finds it difficult to meet the needs of his, or her, own family in an environment where federal and state business income taxes substantially contribute to trade inequities resulting in the loss of American jobs! Thus, the Sovereign are continually degraded by features of Congress's income tax policy. The most rapidly-growing needs-based "special interest" group has become the Citizens! You see? Congress has nearly all the power; and We, the People, have become We, the Serfs, robbed and enslaved. Getting the federal government's hands out of our family paychecks is the single most important reason to replace the income tax with a consumption tax, the FairTax.

Many of us have joined in order to build a national movement to free ourselves, our family pocketbooks, and our businesses from confiscation of income, and punishment of productivity. And this we say to our federal representatives,

"Either scrap the code and enact the FairTax, or we intend on replacing you with someone who will."

(May reproduce in whole or part. - Ian)

RetiredArmyMAJ's picture
Submitted by RetiredArmyMAJ on Tue, 01/08/2008 - 7:06am.

You have an excellent point that 23% isn't guaranteed, especially since the original income tax started small. In 1913 the tax rate was 1% on taxable net income above $3,000 ($4,000 for married couples), less deductions and exemptions. It rose to a rate of 7% on incomes above $500,000.

The big difference in the Fair Tax is that politicians will have to raise EVERYONE'S taxes! Try justifying pork spending then!

Fighting for truth, justice and the American way, while ignoring the ignorant!

Shelby Barker's picture
Submitted by Shelby Barker on Mon, 01/07/2008 - 8:33pm.

HAHAHA this is hilarious!!!

This is the exact reason I have stop responding to these ignorant comments, and half truths.

If you are unfamiliar with the Fair Tax, please email me and I will answer any questions personally.

Huckabee 08'

Submitted by sageadvice on Tue, 01/08/2008 - 7:16am.

Carvey said that!

Submitted by sageadvice on Tue, 01/08/2008 - 3:34am.

The MSRP price for a book is say $30. Does that include the 23% tax?

I pay, as a retailer, $18 for the book. (I don't know what the wholesaler paid the manufacturer)

Now I need a 40% gross margin (not mark-up) on the sale to pay the overhead, so the book now has a price of $30 ($18.00 x 1.67 = ~$30.00)

My gross margin is 40% ($30 - $18 = $12.00
$12.00 divided by $30.00 sale price = 40% gross margin.

Now do I add 23% sales tax to the $30, or to $30 x 23% = $6.90, plus the $30 = $36.90, time 23% again, for a sale price of $45.39?

I know, read "the book." That is where I got this from!

Submitted by dneighbors on Tue, 01/08/2008 - 8:52am.

Since your cost + gross margin = $30.00 your receipt should show:

Book $30.00
FT $9.00

Item Price $39.00

Any local sales tax x.xx

Total $xx.xx

Submitted by sageadvice on Tue, 01/08/2008 - 11:47am.

Then the $18 the retailer pays the distributor does include 32% tax, right? The real wholesale cost is really $18 minus 23%, or $13.70?
Could you start with the printing presses and follow it through to the retailer? I doubt it---neither can anyone else!

Sniffle2's picture
Submitted by Sniffle2 on Mon, 01/07/2008 - 8:48pm.

Ridiculing those who dare to oppose your beloved unFair Tax? How DARE there be unbelievers!

You'll make a large number of converts to your cause that way! Sticking out tongue

Shelby Barker's picture
Submitted by Shelby Barker on Mon, 01/07/2008 - 9:03pm.

The Fair Tax is an embedded sales tax of 23%.

So if you buy an item that is $1.00, that's it, that is the total cost.

which means that the actual cost of the item is $.77.

Not to mention the actual cost of the item will be driven down once we remove the IRS.

Now, I have attempted to create multiple outlets to educate our citizens about the Fair Tax. Allen Greenspan knows the Fair Tax will immediately bring millions of jobs to America, it will return the power back to the people with the creation of the 4th branch of government, the people, and it will help stop illegal immigration with the pre-bate. Despite all of these positives, I know that you or Jeff will write back with more half truths, and I feel no need to respond any longer.

If you or anyone else has a question about the Fair Tax,

Huckabee 08'

JeffC's picture
Submitted by JeffC on Tue, 01/08/2008 - 3:33pm.

I'm not presenting half-truths here, I'm raising legitimate questions that Mike better have an answer for besides "read the book" or giving out the FairTax web site address. What's he going to say when he's in a debate with the Democratic nominee and they say "Mike Huckabee supports a 23% tax on your credit card debt, your rent and your mortgage."

You've got 90 seconds to respond.

Personally, I don't care one way or the other nor am I arguing against the FairTax. I don't believe it has a ghost of a chance of being implemented. It's pure fantasy. I just like the politics of it.

And the politics of it tell me that Huckabee is going to be in major, major trouble over this.

I like Mike! We'll beat him but I like him.

But seriously, y'all need to come up with some answers and quick. I think Mitt is going to be desperate after tonight and Giulanni already is because his strategy of wait, wait until Florida did not take Huckabee into account. He thought he'd be running in Florida against a liberal Mass. governor not a southern Christian conservative. Huckabee threw a major wrench into Giulianni's campaign machine.

"I feel no need to respond" ain't going to cut it against $20 million in Mitt's advertising and Giulianni comparing the FairTax to 9/11.

Shelby Barker's picture
Submitted by Shelby Barker on Mon, 01/07/2008 - 10:24pm.

The tax is embedded so in order for the out the door price of an item to be $1.00 the item would need to be originally $.82.

Sorry for the confusion.

Huckabee 08'

Submitted by new2ptc on Mon, 01/07/2008 - 9:47pm.

I must be thinking too far inside of a box to understand how your application of mathematics applies as you stating. Embedded or not (embedded only means the tax is hidden) you’re saying an item costing $0.77 with a 23% tax will cost a consumer $1.00.

The way I learned to apply percentages (Tax) is if you have an item costing $0.77 multiply that value by 0.23 (23% Tax) the tax I get is rounded to $0.18. Now add the $0.77 to the $0.18 and it totals to $0.95. Looking further using the same math I find that the $0.77 item with approximately 32% applied gives me the $1.00.

Only when I see a mathematical formula that produces $1.00 cost for a $0.77 item with 23% tax applied will I believe this consumption tax is a viable tax plan. Otherwise it's omly smoak and mirrors.

Shelby Barker's picture
Submitted by Shelby Barker on Mon, 01/07/2008 - 10:16pm.

You are right, thats embarrassing....oh well that's the great thing about the fair tax, a simple mistake like that would have doomed me for at least a year of audits by the IRS...this can't happen under the Fair Tax.
Huckabee 08'

BPR's picture
Submitted by BPR on Tue, 01/08/2008 - 4:01pm.

Some of us are considering Huckabee 08.Smiling I think Huckabee is totally
Cool.We really need someone who is not afraid to stand up to people who differ and they are not hateful and have a hateful look on their face all the time. Hint- Hint.Laughing out loud

"Hope Changes Everything"

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