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FairTax Prebate Explained

http://waysandmeans.house.gov/Upload...axation_10.pdf

The chart in the OP was moved.

How does the FairTax stack up against the current Income Tax and the Flat Tax?

FairTax Comparison Chart, Relinked:

http://fairtax-psyclone.netdna-ssl.c...pdf?1419283200

Originally Posted by Space Racer

No. Revenue neutral simply means that it produces as much revenue as the current system. The government will not suffer a loss of revenue.

There are no losers because the FairTax puts the wasted money from the current system back into the pockets of those taxpayers who are paying twice for one tax. It does not take money from sources that are not already spending it.

Yes I know what revenue neutral means. If the same revenue is being produced and you imply that someone saves by not being taxed twice. It either means that everybody is paying the same anyways or of someone is saving and paying less then somebody has to be paying more.

If there are no losers then it means everyone is paying the same as they are now.

Originally Posted by pageyjim

You say the "Fairtax" is revenue neutral and stops people from paying tax twice. If it is revenue neutral that either makes no difference or there are winners and losers.

No. Revenue neutral simply means that it produces as much revenue as the current system. The government will not suffer a loss of revenue.

There are no losers because the FairTax puts the wasted money from the current system back into the pockets of those taxpayers who are paying twice for one tax. It does not take money from sources that are not already spending it.

You say the "Fairtax" is revenue neutral and stops people from paying tax twice. If it is revenue neutral that either makes no difference or there are winners and losers.

Well folks, I hate to admit it, but the second spreadsheet is still messed up. You can throw it in the trash. (It's the one about the cost of a table.)
I plugged in the numbers and made a far-fetched prediction, but I screwed up the math on the embedded wholesale income tax in Column B. The tax amound is embedded in the cost, but I added it to the cost.

I apologize for the inconvenience I have caused you.

Here's a more realistic version (subject to tweaking).

As the cost of compliance goes down, the overhead goes down. I arbitrarily decreased the overhead by twenty dollars, the same amount the FairTax increased tax costs by, so that profit would be unaffected. Twenty dollars is .5% of revenue.

Compliance costs are predicted to decrease by 90 to 95%, but at this time I have no idea how much effect this drop will have on total overhead.

Attachment 591361

The FairTax is one of those things where you need to follow the money.

Where did it start? Who is pushing it? And why?

It's whom you probably would've guessed - the rich billionaire club of America (TM).

The FairTax and FlatTax supporters like to make it seem like the middle class comes out ahead, but it simply isn't true. The rich in this country by far pay the most tax under the current progressive income structure than they would under a flat tax structure, and the rest has to be made up by non-other than you guessed it, the poor and middle class.

Why would they (the rich) pay less? Because unlike the guy in your example earning $40,000 a year, the rich don't spend the majority of their money. Or even anywhere near it. My wife and I are not in the "rich" category by any measure, yet we are saving six figures a year and spending the rest on life and taxes.

It's even more pronounced the higher up you go in the income brackets. You spend far less than your income, which traditionally would've been taxed, and which isn't under these flat tax schemes.

Meanwhile, Joe the HVAC guy, earning his $40,000 a year, spends the vast majority of his pay check on every day life.

If we do anything, let's start by throwing out all the deductions handed out. Mortgage interest, school expenses, charitable deductions, etc. Gone. Then lower the tax rates. Start with that. Simplifying the tax code should certainly be something that is on the radar.

In post #6, I said:

Originally Posted by Space Racer

If a good employee is aware and his employer is aware and honest, the employer should have no problem paying the full 43060 under the FairTax system. Subtracting 23%, this brings buying power up to 33156.

There is also a prebate in the plan. The prebate serves as compensation for the taxes spent on income below the poverty line. According to the ASPE, the poverty line for a single person is 11770. 23% of this is 2707. Added to 33156, this brings total buying power to 35863. This is $10,000 higher than the 25692 of the current system.

http://aspe.hhs.gov/poverty/15poverty.cfm

This is what I meant:

Attachment 591031

Originally Posted by pageyjim

I agree with much of what you say. A few disagreements would be that I envision more government intrusion. I can imagine taxed goods needing a stamp or something. That was what I meant about the mattress. This would be to counter the inevitable black market.

I meant pointless in that it is revenue neutral supposedly and we share close to a flat tax rate now. You point out the winners, who would be the losers then? You can't be revenue neutral and have winners without losers.

All goods would be taxed; no exceptions. This minimizes compliance headaches and costs. No extra software or employees would be required on site to make sure the right items were being taxed. This is a factor in determining the amount of the prebate.

Everyone who buys goods and services now already contributes 22% of their expenses in payment of the funds that enable businesses to pay their income taxes and their employees' income taxes. The FairTax simply converts this embedded income tax into an embedded sales tax of 23% (yes, that's one more percentage point) and then pays everyone back thousands of dollars per year, according to family size and the state they live in.

The losers now are the people who pay twice for the same tax, and the people who can't find work because the economy is in such bad shape. After enactment of the FairTax, everyone is a winner because the system is so much less wasteful. It's a total win/win bargain for US citizens.

The only losers are the politicians whose political survival hangs on their ability to leverage the existing system to the advantage of their special interests, and the tax accountants and tax lawyers who would find their agendas lacking.

Look at the first spreadsheet at cells E26 and E28. This employee is paying 17,000 in taxes, but the government only receives 10,000. The other 7,000 is in the form of redundant payments. It's completely wasted.

Now look at H26 and H28. The redundant payment has disappeared. The government receives the entire amount paid.

And no one has to check your income tax paperwork every April, because you don't need to submit any. You get to keep your whole paycheck.

Originally Posted by Space Racer

Yes, the FairTax would provide an opportunity for people with tight budgets to save a few bucks by buying second-hand goods. At the same time, it would promote recycling on a large scale.

At the same time, it would avoid putting people into higher tax brackets just because they want to work longer hours and put their kids through college. One of the big problems with the current system is that it punishes those who are the most honest and consciencious in their reporting, and those who need to increase their incomes.

It also punishes small family businesses by making it too expensive for the parents to pass the business to their kids.

It would mean less government intrusion. The IRS would go away.

The only people filing tax returns would be retail busness owners. The infrastucture needed for collecting taxes is already in place in all the states that collect sales tax.

People would be much more likey to buy things because they would have more cash to spend. They would be much less inclined to put purchases on their credit cards.

"Pointless?" Is it pointless to add $10,000 to the buying power of a $40,000 salary simply by improving the efficiency of our tax system?

The great advantage of a strictly retail sales tax is that it's the only tax that does not necessitate redundant payments. All other taxes fail because after they are paid, their cost is folded into the cost of goods and services. Thus they are paid twice, but only collected once.

I agree with much of what you say. A few disagreements would be that I envision more government intrusion. I can imagine taxed goods needing a stamp or something. That was what I meant about the mattress. This would be to counter the inevitable black market.

I meant pointless in that it is revenue neutral supposedly and we share close to a flat tax rate now. You point out the winners, who would be the losers then? You can't be revenue neutral and have winners without losers.

Originally Posted by pageyjim

Can you say black market economy? It would ultimately mean more intrusion by the government imo. I bet then it really would be a crime to tear a sticker off of a mattrress. This may hurt the economy in the long run because there would be a real incentive not to buy anything.

I think it would have some nice side effects. People may want to hold onto things longer to avoid the tax.

When all taxes are considered we have close to a flat tax rate now and being revenue neutral it almost seems pointless.

Yes, the FairTax would provide an opportunity for people with tight budgets to save a few bucks by buying second-hand goods. At the same time, it would promote recycling on a large scale.

At the same time, it would avoid putting people into higher tax brackets just because they want to work longer hours and put their kids through college. One of the big problems with the current system is that it punishes those who are the most honest and consciencious in their reporting, and those who need to increase their incomes.

It also punishes small family businesses by making it too expensive for the parents to pass the business to their kids.

It would mean less government intrusion. The IRS would go away.

The only people filing tax returns would be retail busness owners. The infrastucture needed for collecting taxes is already in place in all the states that collect sales tax.

People would be much more likey to buy things because they would have more cash to spend. They would be much less inclined to put purchases on their credit cards.

"Pointless?" Is it pointless to add $10,000 to the buying power of a $40,000 salary simply by improving the efficiency of our tax system?

The great advantage of a strictly retail sales tax is that it's the only tax that does not necessitate redundant payments. All other taxes fail because after they are paid, their cost is folded into the cost of goods and services. Thus they are paid twice, but only collected once.

Can you say black market economy? It would ultimately mean more intrusion by the government imo. I bet then it really would be a crime to tear a sticker off of a mattrress. This may hurt the economy in the long run because there would be a real incentive not to buy anything.

I think it would have some nice side effects. People may want to hold onto things longer to avoid the tax.

When all taxes are considered we have close to a flat tax rate now and being revenue neutral it almost seems pointless.

They will never give up the power to tax is the power to destroy.

Here's an example of what would probably happen to the cost structure of a piece of furniture as the tax system changes from the current income tax system to the FairTax system. Over time, as costs and efficiencies continue to settle, wholesale prices would probably gravitate toward the original 50% level. As the cost of compliance fades away, costs at all levels would diminish to some degree.

Attachment 590801

I made a couple of spreadsheets and posted them in ARP, but I made a few errors and didn't catch them until it was too late. So I decided to post the corrected copies in this thread. If the double post is a problem, I would prefer to delete the ARP thread.

This spreadsheet shows how the taxes stack up with the current income tax system and the FairTax system.

If a good employee is aware and his employer is aware and honest, the employer should have no problem paying the full 43060 under the FairTax system. Subtracting 23%, this brings buying power up to 33156.

There is also a prebate in the plan. The prebate serves as compensation for the taxes spent on income below the poverty line. According to the ASPE, the poverty line for a single person is 11770. 23% of this is 2707. Added to 33156, this brings total buying power to 35863. This is $10,000 higher than the 25692 of the current system.

http://aspe.hhs.gov/poverty/15poverty.cfm

Its chances of passing have been improving over the last few years.
The total number of sponsors and co-sponsors is now at 83.
http://thomas.loc.gov/cgi-bin/bdquer...3:HR00025:@@@P
http://thomas.loc.gov/cgi-bin/bdquer...13:s00122:@@@P

Sadly it will never pass. It would mean the end of social engineering by our government through the tax code.

The FairTax is up for a vote before the Committee on Ways and Means. "This vote will represent the first time ever that a Congress body has voted on the FairTax," says Cindy Canevaro, the executive director of Americans For Fair Taxation.

Georgia Congressman Rob Woodall, a sponsor of the FairTax Plan, discusses the process in a conference call:
http://rec001.freeconferencecalling....77_1054583.mp3

For more info on the FairTax, see http://www.fairtax.org/site/PageServer

I like it

FairTax Comparison Chart

How does the FairTax stack up against the current Income Tax and the Flat Tax?

http://www.fairtax.org/PDF/FairTax%2...on%20chart.pdf