20070131

Wikipedia and the Fair Tax

I decided to revisit the "Fair Tax" issue, and once again I visited Wikipedia to see if any changes had occurred there.

I noted that the bullshit "Effective rate" graph(see it here) still appears at the site. So much for peer review. I dug a little deeper into where the graph came from. I discovered it is based on a similar graph by the "Americans for Fair Taxation". I'm certain "Americans for Fair Taxation" is an unbiased group and that they receive no funding from anyone that would end up benefiting from our society adopting what they propose. If anyone senses a little sarcasm in that last statement - bulls eye. If you doubt the graph is little more then propaganda, take out a 1040A and insert a "rather average" income level of $43,000 for a married couple with two children and compare their resulting tax rate with what they would pay under the "Fair Tax" even allowing for the "prebate". If you bother to take out your calculator, you will find Joe Average's family gets to pay more then $2,000 additional tax under the Fair Tax then under the existing system. This does not even take into account that "Joe Average" might actually be making a mortgage payment that might allow him to itemize and lessen his tax bite under the current system.

However, I also found another graph on Wikipedia (see it here) which seems to display, in graphic detail, that the results will be quite the opposite for the American Middle Class. Please note that this graph shows that most people making from $15,000 to $200,000 per year will see an increase in their share of the tax burden while those making over $200,000 per year will see a significant decrease. Where does this graph come from? It was produced by the Department of the Treasury, Office of Tax Analysis.

Let's see, which source are we going to trust? Dept of the Treasury or Americans for Fair Taxation? What? You don't trust the government? Well then apply a little common sense to the issue. Those in favor of the "Fair Tax" claim it will be revenue neutral. Does the Americans for Fair Tax graph show revenue neutrality? It does not. It shows a few paying the same with most getting a tax cut. Doesn't sound very revenue neutral now does it? But let's apply some common sense to the Dept of the Treasury graph. Under the Fair Tax, the wealthiest of our society are going to pay lower taxes. Where is the shortfall in collections from the wealthy going to come from if the proposal really is revenue neutral? The graph shows the target of increased tax collections falls upon the American middle class and even dips into the lower class. The Dept of the Treasury graph passes the "common sense" test. I have to resort to "common sense" on their graph because I do not have access to all the data they probably used to examine and then graph the results. It also seems to match the results of when I took out my calculator to examine what happens to "Joe Average", however my expectations are that they (the Dept of the Treasury) used a broader spectrum of examples to compile their results.

Now I guess I can understand why the upper class would be in favor of the "Fair Tax". They get a big tax cut and I guess they are just greedy. However I can not understand why anyone in the middle class with any intelligence and even a modest degree of common sense could be in favor of it. What? They are in favor of paying MORE taxes to fund a tax cut for the wealthy?

How do some of these people even figure out how to set the alarm clock so that they manage to show up for work on time?

20 Comments:

Blogger Lethal_Poison said...

I have spent long periods of time pointing out how the only people harmed by fair tax would NOT be the WHOLE middle class, just the upper middle class, spendthrifts, or the middle class person taking advantage of insane amounts of tax credits, which in themselves are not fair.

My wife and I make over 43k together, gross, and we would be significantly aided by a fair tax, as would the following people.

1. Anyone making under the prebate amount gross income

2. Anyone not owning property

3. Anyone not able to take advantage of dozens of tax credits and gross income deductions, either for or from.

4. Anyone who does not spend all of their discretionary income on frivolous purchases.


This pretty much includes

100% of the poorest classes, who would pay zero tax.

Most of the lower middle class brackets, and any solid to high middle class brackets who dont have property/and or cannot receive tax credits/deductions, and also who could not spend enough money to possibly equivalate out to the same tax they would pay from income tax.

Most of the wealthy who do not spend enough money to make up what they would pay out in income taxes otherwise.

2/01/2007 02:10:00 PM  
Blogger Little David said...

My guess is that the data examined by the Office of Tax Analysis to come up the results shown in their graph included all the examples you gave.

Their results show that even those in the $15K - 30K bracket would end up paying slightly more under the Fair Tax. It does show that those households earning less then $15K would see a significant benefit. How is it possible that someone making as little as $15K would see an increase? I would imagine that the government analysis includes the effects of the elimination of the child tax credit and the Earned Income Tax Credit which most lower income households with children qualify for.

Their analysis shows that all those households in the $30K to $200K brackets would see significant increases in their tax burden. Those in the $30K to 40K bracket would see their burden almost double for example.

Perhaps you, in your very narrow set of circumstances, would benefit under the Fair Tax, however the majority of American households sharing your level of income would end up paying higher taxes.

By the way, when I did my "Joe Average" calculations, Joe did not itemize so he was unable to take advantage of mortgage interest deductions or any of the other "dozens of tax credits and gross income deductions" with the exception of the child tax credit because Joe had two kids. Even without the aid of itemizing, "Joe Average" ends up paying over $2K more per year in taxes. The Office of Tax analysis graph seems to back up the accuracy that "Joe Average" does serve as a representative example since it shows that, amongst all Americans households as a whole, their tax burden will increase from 2.6% to 4.2% of gross income.

The evidence would seem to indicate that the Fair Tax would indeed be UNFAIR to most members of the American Middle Class and would involve at least some level of tax increase for incomes levels as low as $15K per year.

2/02/2007 07:20:00 AM  
Blogger Lethal_Poison said...

1. $15K - 30K


reply- False.

A person making 15k a year, would be taxed, AT MAXIMUM,(assuming they didnt spend more then they make) under the fair tax

15k-10,210= 4790*.23= 1101.70


15k*7.65% payroll taxes

$1147.5


For 30k and one person?

Fair tax

30-10210= 19790*.23=$4551.70 max tax

Tax as set up now?

30k*7.65% payroll

2295

PLUS

30k-standard deduction 8450= 21550 taxable income

tax on 21550 is 2701

2701+2295 is $4996

In both cases, and all income levels in between, youd be paying more as a single person in the current tax structure then you could possibly pay in a fair tax structure.

Thats assuming that you arent getting an assload of deductions.


2. Those in the $30K to 40K bracket would see their burden almost double for example.


Lets review a 40k, shall we?

Single 40k a year

40-10,210=29790*.23= 6851.70 max

Under the current system?

40*7.65%= 3060

Plus

40-8450= 31550 taxable income

4451 tax

that is $7511


Want to try for 70k?

Fair Tax

70-10210= 59790*.23= 13751.7

Current system

70,000*7.65%= 5355

70000-8450= 61550 taxable income= 11951

17306 taxable income.

Without tossing in the numerous tax deductions, and tax credits, that make the tax system regressive and not fair to non property owners, non marrieds, and with no dependents, there is no situation under the 96,400 social security shield ceiling, that one would pay less tax now, then under the fair tax. Period.



2. Perhaps you, in your very narrow set of circumstances, would benefit under the Fair Tax, however the majority of American households sharing your level of income would end up paying higher taxes.


Reply- Only if they owned a house. Unfortunatley, those of us with out property are screwed in the tax system. Thats ok though, because as long as it benefits you, or 65% of Americans, then its ok to be regressive. You arent interested in "fair" if it might hurt you.


3. Even without the aid of itemizing, "Joe Average" ends up paying over $2K more per year in taxes.....


The child tax CREDIT is regressive on those not having children, and therefore is BS. Not only do you get to claim them as an exemption, but then get to claim then again as a credit. That is rediculous.

Even so.

Family with 2 kids and 43k

Fair Tax

43k-27380= 15620*.23= 3592.60 max tax

Current Tax

43k * %7.65=

3289.5

+ (from 1040A) 0 (completely reduced by the regressive/rediculous child tax credit)

It is STILL only about $300 less. I dont know where the hell you got $2000 from, but somebody seriously screwed up their math, i.e. you. The child tax credit only reduces tax liability, and you cant get out of paying FICA.

In fact, in order to pay 2000 more dollars in taxes, that family making 43k would have had to spend 23k, on top of the tax shielded 27380, or 50380, OR 117% of their income.

So yeah, if you are taxing one household at 117% of their income, and the other at 100%, there might be a $2000 difference.


4. amongst all Americans households as a whole, their tax burden will increase from 2.6% to 4.2% of gross income.


Reply- This would only be true amongst those taking heavy advantage of the regressive tax credits and deductions, which are fair in your book.

My household federal tax burden (including FICA) would fall from about 17% to 12%, assuming that I spent every penny I made. As would pretty much ANYONE in my situation, owning no property, having no kids, and making under the SS income cap.


5. The evidence would seem to indicate that the Fair Tax would indeed be UNFAIR to most members of the American Middle Class and would involve at least some level of tax increase for incomes levels as low as $15K per year.


Reply- How is it "unfair"? Is your measurement of "unfair" that it strips them of their regressive tax credits and deductions? How is it fair that owning land comes with a tax break, and churning out a kid gets you a $1000 credit? How is that fair?

What you fear IS being taxed fairly, because you fall in to the pile of people taking advantage of the UNFAIR regressive tax credits and deductions. Your simple answer for this is "go buy a house or have some kids, then you can get those credits" not "yeah, Im taking advantage of regressive taxation practices, and maybe thats not so fair after all".

Maybe, thats what they should have told Martin Luther King. Clearly, the perfect solution was to, "go become white, then you can be treated fairly".

2/05/2007 11:58:00 AM  
Blogger Little David said...

Perhaps you exposed a hole in my own argument. But I had to delve deeply to find this hole since the figures you identified do not clearly label the same figures.

So, the "Americans for Fair Taxation" graph might be true? So their graph shows everyone really does get a tax cut as it shows.

I just wonder how we are then going to pay the bills. No need for the FBI, aircraft carriers or interstate highways. Everyone gets everything and once again nobody has to pay for it.

Perhaps you too will benefit from the "Fair Tax" proposal. But you too will be left with the unpaid bills.

I wonder where the government graph came from since we seem to be so much smarter then them? Although we have been smart enough to reach the conclusion the bills are not going to be paid if we get our way.

2/05/2007 12:37:00 PM  
Blogger Lethal_Poison said...

1. So, the "Americans for Fair Taxation" graph might be true? So their graph shows everyone really does get a tax cut as it shows.

Reply- Yes, most people would get a tax cut, the richer you are, the bigger your percentage of tax cut youll likely get. Those who would see their taxes increase are those who are able to reduce their taxable income, or tax liability, through deductions and credits, by gobs of money. It is also true that a majority of which would end up being middle America, that I dont debate.

My issue is that those tax credits and tax deductions are inherently unfair in the first place.


2. I just wonder how we are then going to pay the bills. No need for the FBI, aircraft carriers or interstate highways. Everyone gets everything and once again nobody has to pay for it.


Reply- Im am with you on that one. That is the biggest problem, and significant it is, that the total tax revenue would be greatly reduced, primarily because the wealthy would have their tax burden as a percentage significantly dropped. Im guessing either significant cuts would be made, or the government might actually have to be responsible with the revenue they do get for a change.


3. I wonder where the government graph came from since we seem to be so much smarter then them?


Reply- Propaganda can me created and spun by any source, including the government. Matter of fact, there is no better institution in the world at planting propaganda.

The US government was able to make a whole generation of people believe that Communism was the biggest evil that ever existed through endless propaganda. Nazi Germany even had a whole government branch in charge of creating and distributing propaganda.


4. Although we have been smart enough to reach the conclusion the bills are not going to be paid if we get our way.


Reply- If the government kept up its trend of fiscal irresponsibility, yes, bills certainly wouldnt get paid, and wed fall even further in to the red. This is true in every sense of the word. Those who throw everything they got in to supporting the Fair Tax state that revenues would be the same, but I dont see the numbers coming close to that. You cant give everyone a tax cut, especially amongst the wealthy, and expect the revenues to rise, especially when you are only taxing purchases and not more passive types of income, like investment gains. Its just not going to happen.

To me, that is the best argument against the fair tax, not that it harms "most people".

2/05/2007 01:54:00 PM  
Blogger Little David said...

To my viewpoint, the best argument is that the Fair Tax is not revenue neutral and that a greater percentage of the tax revenue remaining would come from the middle class.

I am a big deficit hawk. I am troubled by the existing deficit spending with current revenue. I do not want to add to the problem with an even bigger resulting revenue shortfall.

By the way, this is the object of some conservatives (although I will not describe them as fiscal conservatives). Their objective is to cut off as much revenue as possible so that "big government" then chokes on the still existing expenditures. They hate "big government" so badly that they are willing to throw our nation even into another great depression to achieve their aims.

2/05/2007 06:22:00 PM  
Blogger Little David said...

Ooops, I went back and examined where I proved that "Joe Average" (married, $43K with two kids) pays more then $2k extra in taxes under the Fair Tax.

The hole I thought you had pointed to was that I thought I had forgot to figure in the Payroll tax for "Joe". However I was mistaken, my example took that into account.

I am now going to return to my contention that the "Office of Tax Analysis" graph represents the truth for most Americans. Not every American, just "most" of them.

2/05/2007 07:30:00 PM  
Blogger Lethal_Poison said...

1. To my viewpoint, the best argument is that the Fair Tax is not revenue neutral and that a greater percentage of the tax revenue remaining would come from the middle class.

Reply- So what? The only reason this is so is because the taxes on the wealthy would fall by a much greater percentage then the taxes on the middle class, not because the middle class will be paying more taxes now then they were.


2. I am a big deficit hawk. I am troubled by the existing deficit spending with current revenue. I do not want to add to the problem with an even bigger resulting revenue shortfall.


Reply- So instead of fiscal responsibility, you are in favor of even more taxes so we can hand even bigger blank checks to our worthless politicians? Maybe we should just turn our whole paychecks over, then maybe they can fund the wars in Iran or Korea that they are so eager to engage in.





3.The hole I thought you had pointed to was that I thought I had forgot to figure in the Payroll tax for "Joe". However I was mistaken, my example took that into account.

Reply- Check the math, its right there in black and white. You were/are just plain wrong. That is all. FICA tax ALONE, which cant be reduced by the child tax credit which only reduces federal tax liability is only about $300 less then the MAXIMUM tax the same family would pay under the fair tax. If the family managed to save about 1000 bucks, they would reduce their tax liability below the FICA tax in the current scenario.



4. I am now going to return to my contention that the "Office of Tax Analysis" graph represents the truth for most Americans. Not every American, just "most" of them.


Reply- What truth? That their burden of taxation will rise? That doesnt neccessarily mean anything. You are comparing apples and oranges here when you are comparing effective tax rates and burden of taxation, they point to two COMPLETELY different measurements.

Example

Bill pays 5 dollars in taxes (15.6%)
John pays 7 (21.8%)
Sue pays 20 (62.5%)

Tax cuts

Bill now pays 4 (16%)
John pays 6 (24%)
and Sue pays 15 (60%)

All 3 peoples effective tax rate went down, while Bill and Johns percentage of tax burden went up. See how that works?

Now, again, the only problem would be that $7 of lost revenue.

2/06/2007 09:13:00 AM  
Blogger Little David said...

When I did my example for "Joe Average", it took into account Joe's employee share (7.65%) of the payroll tax and he still ended up paying over $2K more per year under the fair tax then he would under the existing system, even without itemizing.

Proponents of the Fair Tax (only most, not all, since you do not make this claim) state it will be revenue neutral, that it will result in neither lost revenue nor revenue increases.

Your example of the lower income tax payer does not take into account the Earned Income Tax Credit. This tax credit actually allows a person to receive a "tax refund" of money that was never with-held from their checks, which is why the Office of Tax Analysis graph actually shows a negative rate of taxation for this income level in their graph.

Evidently the Office of Tax Analysis did a pretty thorough job, unlike you.

2/06/2007 10:30:00 AM  
Blogger Lethal_Poison said...

1. When I did my example for "Joe Average", it took into account Joe's employee share (7.65%) of the payroll tax and he still ended up paying over $2K more per year under the fair tax then he would under the existing system, even without itemizing.


Reply- How do you figure? Where did you come up with Joe paying $1500 in taxes (the amount required to pay $2000 less then the MAX tax for the Fair Tax), when his FICA ALONE is $3289.50. I suggest you check your math again because you are WAY off somewhere. Maybe you still arent comprehending tax shields, even after I spent 2 other threads explaining them?


2. Proponents of the Fair Tax (only most, not all, since you do not make this claim) state it will be revenue neutral, that it will result in neither lost revenue nor revenue increases.

Reply- I certainly disagree with this point, and although I do agree with the Fair Tax, I also think its going to result in heavy loss of revenue which would have to be dealt with.


3. Your example of the lower income tax payer does not take into account the Earned Income Tax Credit.

Reply- First of all the EITC can not be taken if you make more then something like $12,120 and you are single.

So, the difference between the EITC credit, and the paid income tax would be negligible since the most tax you would pay on 12,120 dollars of purchases is $395.60, which is actually less then the FICA-EITC ($927.18-$10) youd get nailed for on that amount.


For any income that the EITC would actually make a significant dent, the taxable income under the Fair Tax would be 0.

Meanwhile, you owe FICA for the first penny you make. So, the EITC would have to make up any FICA tax paid, before even becoming an actual "positive" over the Fair Tax.

In reality, the only people who would be hurt by this would be single parents making next to minimum wage or less, and they wouldnt be exactly "hurt", they just wouldnt be paying a negative income tax (getting a refundable credit). Their tax liability would still be $0 though.

I dont believe people should be rewarded for dumping out kids, this includes the child credit, and the EITC benefit for them. These types of things are UNFAIR.


4. Evidently the Office of Tax Analysis did a pretty thorough job, unlike you.


Reply-

Again, you are trying to use a TAX BURDEN PERCENTAGE CHART to prove that the lower classes get levied HIGHER REAL TAXES. These are not the same things, not even remotely.

I dont see where you posted a real taxes paid, or effective tax rate summary from your precious "Office of Tax Analysis". The only thing you do is bash the "partisanship" of the one site that you DID find something showing that data.

Im willing to bet, mostly because it disagrees with you. That is one thing you got a tremendous talent for, bashing and discrediting things that dont fit your opinion.

2/06/2007 12:03:00 PM  
Blogger Little David said...

Here's the figures for Joe Average:

Federal tax liability for this family according to a 1040A is $2,304 - $2K child tax credit = $304 federal income tax. $43K times 7.65% (employee share of Social Security Tax) = $3,290. 304 + 3,290 = $3,594 in total taxes under current system.

Under fair tax: 43K Gross income - 3,594 (taxes under old system) = $39,406. $39,406 times 30% (amount of increase in daily expenses due to fair tax) = $11,822. $11,822 - prebate of $6,072 = $5,750.

Fair tax $5,750 - current tax $3,594 = $2,156 increase in taxes for this "average American" family.

As for the EITC, according the IRS a person can qualify for it if they have more than one qualifying child and earn less than $36,348 ($38,348 if married filing jointly). For the 2006 tax year, the maximum credit is $4,536 for a family with two or more children; $2,747 for a family with one child and $412 if the taxpayer does not reside with children. Of course as the level of income goes up, the amount of the EITC goes down.

All claims for the Fair Tax (other then yours evidently) are that it is supposed to be revenue neutral. That means the tax burden chart showing an increase in the tax burden would represent an increase in taxes paid.

As for my bashing the Americans for Fair Tax graph, the Americans for Fair Tax are amongst those claiming the tax will be revenue neutral however their chart does not match their claims.

2/06/2007 02:39:00 PM  
Blogger Lethal_Poison said...

1. Under fair tax: 43K Gross income - 3,594 (taxes under old system) = $39,406. $39,406 times 30% (amount of increase in daily expenses due to fair tax) = $11,822. $11,822 - prebate of $6,072 = $5,750.


Reply- This is wrong.

This requires a simple equation

(Income-Tax Shield)*.23

I dont know what the hell you are calculating there.

First of all, I dont know why you are subtracting out the taxes from the old system, that makes no sense. The old systems taxes have no bearing on the new systems taxes.

Second, I dont know where you got 30%. The tax rate we are talking about here is 23%, which is what is recommended by the fair tax campaign. I dont care what you read somewhere about how the 23% is going to influence state taxes or cost of goods, blah blah blah. We are talking about actual federal taxes. We have to compare oranges to oranges here.

The maximum FEDERAL taxes someone who makes 43k (assuming they dont spend more then they make) is this

(43,000-27380)*.23

In plain English, after the tax shield, a person would be able to buy exactly -(43000-27380)*.77- or $12027.40 of goods netting EXACTLY, $3592.60 worth of tax with $0 left over.

Not that hard.


2. As for the EITC, according the IRS a person can qualify for it if they have more than one qualifying child and earn less than $36,348 ($38,348 if married filing jointly).


Reply- Again, the only people who benefit are those with kids. A single person doesnt get jack. Furthermore, the only people who would actually benefit more because of a negative tax credit, are those who can reduce their complete tax liability AND cover their whole FICA tax with the credit, those would be the lowest income levels. Those around 36k would not benefit at all, as their EITC wouldnt even reduce their FICA liability below the max income tax payable by the same family under the fair tax, forget about any income tax liability.



3. As for my bashing the Americans for Fair Tax graph, the Americans for Fair Tax are amongst those claiming the tax will be revenue neutral however their chart does not match their claims.


Reply- Why are they claiming that the tax is revenue neutral? Some right wingers believe that tax cuts actually lead to tax revenue increases because of further economic investment. Do you have a link explaining how they arrived at their claim that the tax would be revenue neutral, or are you just assuming?

2/06/2007 03:25:00 PM  
Blogger Little David said...

I hate to post long comments, but I guess I am going to have to do so this time.

23% or 30%? Both percentages are accurate depending on the context within which they are used.

Say a can of Coca-Cola costs one dollar now. After the Fair Tax the can of Coca-Cola will cost $1.30. This is either a 30% increase when the Fair Tax is added, or if you look at the resulting cost, 30 cents is is 23% of the total resulting expense. Both figures are accurate depending how they are used which is why both sides still claim both percentages as being accurate.

In the method I used to compute the Fair Tax increase, use of 30% is the accurate figure to multiply by to obtain the result, and the resulting increase represents 23% percent of the end cost. Understand now?

Why did I first subtract taxes under the old system? Because I am assuming "Joe Average" spends every dime he currently makes in the pursuit of the American Dream. Since he can only spend that portion of his earnings that he does not currently pay in taxes each year, it is accurate to subtract that amount prior to factoring in the Fair Tax increase to come up with his resulting expenses if he is just going to maintain his current standard of living. Understand now?

As for the EITC, a single person can qualify for a modest maximum of $412 so your claim that a single person can not qualify at all is technically in error. However I will agree that the maximum payment is indeed modest. However I do not object to the EITC even though I never once ever qualified for it during my lifetime. I see nothing wrong with it being slanted towards those with children. You object to any benefit for those with children and I do not. Evidently the majority of society agrees with me that there is nothing wrong with this and you are in the extreme minority on this issue.

As for whether or not the Fair Tax is supposed to be revenue neutral or not, I do not know why you would want to force me to "prove" such an elementary aspect of the proposal. Seems to me that you need to read up more on it yourself. However, if "proof" is what you demand:

Americans For Fair Taxation

Please note the opening page of this website, near the upper left hand corner, answers the question "What is the Fairtax?" with: "The FairTax Plan is a nonpartisan national grassroots campaign to replace the federal income tax system with a progressive national retail sales tax. It provides a "prebate" to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement and, through companion legislation, repeal of the 16th Amendment."

Now, they do not use the term "revenue neutral" they use "dollar-for-dollar federal revenue replacement" which I am sure you agree means the same thing.

Much of what I know about the Fair Tax actually came via radio talk show host Neil Boortz who is one of the most vocal advocates of the Fair Tax. Neil is quite insistent that the proposal would be revenue neutral. You might question Neil's expertise on the subject if you would like, however I will point out that he co-authored a book on the subject with Congressman John Linder (R - GA) who is one of the cosponsors of legislative proposals to enact the Fair Tax in the House of Representatives.

Perhaps, if you are really interested in the subject, you might like to read the book for yourself. It was a best seller and is still available via Amazon.com or it might be available at your local library by now. I never bothered to get the book myself because Neil was gracious enough to cover all the arguments made in the book on his radio talk show.

2/07/2007 06:38:00 AM  
Blogger Lethal_Poison said...

1. In the method I used to compute the Fair Tax increase, use of 30% is the accurate figure to multiply by to obtain the result, and the resulting increase represents 23% percent of the end cost. Understand now?


Reply-

I understand EXACTLY where you were coming from, I just dont understand WHY you are using it.

You cannot use that 30% in the calculation of the tax, because the 30% is the increase in a total goods price, not a tax.

What you did was use parts of both theories in formulating your conclusion.

To explain

If you buy a good, regardless of the price it IS, its still a 23% tax right?

In other words if you had 13 dollars, you could buy 10 units at 1.30 right?

23% of each 1.30 unit would be tax. Correct?

So, just multiply that out, if you had 20k to spend, STILL .23 of every purchase would be tax. If you spent $100 dollars, .23 percent would be tax.

It doesnt matter how it affects prices at the register.

So in order to figure out how much is spent on tax, you take the total spent and multiply it by .23, not .30.

We are not figuring out how much its going to "cost" a consumer over current tax, which would actually be 30% at the register, we are figuring out Federal tax here.

An argument could be made that one may be able to buy LESS goods with the same money under a fair tax system, BUT, unfortunatley that doesnt calculate in the further fact that prices would more then likely drop because they wouldnt be reflecting all the various taxes placed down the supply chain, including employer payroll taxes. That right there should be atleast a 3% drop alone. That is a completely different can of worms altogether.

You cannot just assume that prices will remain the same under both systems, and that its going to cost 30% more under a fair tax system.


2. Now, they do not use the term "revenue neutral" they use "dollar-for-dollar federal revenue replacement" which I am sure you agree means the same thing.


reply- On the site you list, there is also a whole section here

Link

That talks about how the fair tax will "create jobs" and "expand exports", yada yada yada. They also mention illegal business being taxed at retail. In other reading on this site they mention "tax evaders". Do you believe any of these things might have some play on their "revenue neutral" assumption? This considering that according to this paper

[quote]http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf[/quote]

They specifically mention "revenues collected", and not "potential revenues collected".

In other words, collecting 23% is revenue neutral, as compared to what the government is actually collecting currently, not what the government could potentially collect.


3. You might question Neil's expertise on the subject if you would like, however I will point out that he co-authored a book on the subject with Congressman John Linder (R - GA) who is one of the cosponsors of legislative proposals to enact the Fair Tax in the House of Representatives.


Reply- Actually after reading what I did today, I have to agree that it WOULD be revenue neutral, it just broadens the revenue subjected to tax. That is how it is able to lower everyones marginal tax, yet still collect the same revenues. Bill Gates is no longer able to be taxed at 30k adjusted gross income.


For some reason I just assumed they were referring to total potential revenues collected. In hindsight, that was an ignorant assumption to make.

2/07/2007 10:29:00 AM  
Blogger Little David said...

Look, once we can agree on elementary arithmetic, we can go further in our debate. I did not go beyond the first few sentences of your last comment because evidently we can not even agree on that.

$1 is the cost of a Coke before the Fair Tax.

$1.30 is the cost of a Coke after the fair tax is added. How do we get to this figure? By multiplying $1 by 130%. (100% of the original cost plus the 30% increase.)

Now, the increased cost of 30 cents represents 23% of the total resultant cost of $1.30.

Don't give me shit about giving you a math lesson. Evidently you need this lesson.

Elementary math is "elemental" to the understanding of the points that are attempted to be made.

2/07/2007 11:01:00 AM  
Blogger Lethal_Poison said...

1. $1 is the cost of a Coke before the Fair Tax.

$1.30 is the cost of a Coke after the fair tax is added. How do we get to this figure? By multiplying $1 by 130%. (100% of the original cost plus the 30% increase.)

Now, the increased cost of 30 cents represents 23% of the total resultant cost of $1.30.


Reply-

That $1.30 is TOTAL COST, it has NOTHING to do with the tax. The SAME percent tax is being applied to the cost.

If I pay 1.30 for Coke, 23% of that is going to tax, period. It doesnt matter one god damn bit how the $1.30 price was derived. That is completely merchant side. No matter how many fucking $1.30 Cokes I buy, Im STILL going to be paying 23% tax. If I bought 300 cokes at a $1.30 thats $390, 23% of that total would be tax, or about $90.

The way you are figuring it is if I bought a $1.30 Coke, then 30% of it is going to taxes, or .39 cents. That is what you are essentially saying when you are using 30 percent as a multiplier on total funds spent. That is not only illogical, but completely, and totally wrong. Christ.

Now, if you wanted to figure out "your way", youd have to FIRST
MULTIPLY all the purchases by about 77% ($1/1.30 to bring them down to the same basis, since in your example, you are multiplying figures with a 1.30 basis by .3, when that is clearly mathematically illogical), THEN multiply that number by 30% (basis of $1 times that .30). You will find that the result should be pretty close to the same number I came up with (save for a few rounding things).


I suggest you stop tryin to TELL me that I dont know what Im talking about in mathematics. I can assure you that you arent even on my radar in computational ability. Thanks.

2. Don't give me shit about giving you a math lesson. Evidently you need this lesson.


Reply- Im not the one who cant do basic fractional equivalation, something my sister in law is learning in 6th grade ie if you can buy X goods at X dollars, then how many x goods can you buy at y dollars. Id also recommend classes in very basic human quotational history, where you may remember the phrase "Its better to be thought of as an idiot then open your mouth and remove all doubt".

Its not so much the fact that you have no clue what you are doing, thats fine, I dont expect everyone to be a math wizard, most everyone has some strength. Its the fact that you advocate that you DO know what youre doing, even so much as to insult others, who clearly have far more ability then you.

Im not going to go tell an engineer or an electrician what they are doing, they know better then I. Unfortunatley, Im sure youd be one over their shoulder pointing out how you could do it so much better, that is, until the building falls down on your recommendations.


Class is over, youre dismissed.

2/07/2007 01:11:00 PM  
Blogger Little David said...

You are increasingly starting to frustrate me in your inability to understand basic math.

Under the fair tax we take the 43K Gross income - 3,594 taxes under old system = $39,406. (Why this is necessary you do not seem to understand) and multiply this by 130% which results in $51,228. Then subtract that from that figure the prior "net income" level we previously obtained to get to the real tax burden under the Fair Tax.

Until we can agree on the basic math, I am unable to go any further in this debate with you. Until we can agree that 1+1=2 there is no hope we can even crack the divide that seperates us.

I think, despite your bachelors degree, that you need to go back and revisit something like the eigth grade before we can go any further. Until you are willing to revisit your math, I refuse to engage you on this topic any further.

Coke costs one dollar. Raising the cost of Coke to $1.30 represents a 30% increase in the cost of Coke.

30 cents of $1.30 represents 23% of the resulting cost of Coke.

If I only raised the cost of Coke by 23% it would only cost $1.23 not $1.30.

Tell me when you have had enough of the math lessons.

2/07/2007 01:56:00 PM  
Blogger Lethal_Poison said...

1. Under the fair tax we take the 43K Gross income - 3,594 taxes under old system = $39,406. (Why this is necessary you do not seem to understand).

Reply- It is completely unneccessary. There is no need to include taxes from the current system in the calculation of taxes in the new system. What you are actually making a simple attempt at, is providing a basic model of the TOTAL FINANCIAL IMPACT of the Fair Tax, not the tax impact, which is not the same thing remotely. Yes, it you buy the same amount of goods in both systems, youll pay 30% more, so what? This completely ignores the 43k income parameter.


2. and multiply this by 130% which results in $51,228

Reply- What are you talking about, $51,228? That is the total dollars needed to purchase the SAME amount of goods and services as you would under the current tax. Unfortunatley, you forget that we DONT HAVE AN INCOME OF $51,228.

We are talking about an income of 43k, married, two kids. THOSE were the parameters YOU set. The parameters werent "If Joe buys x goods under the current condition, what would be the additional tax Joe would pay for the SAME amount of goods under fair tax."


If you were making those parameters, your equation would precisely prove that, then again, youd also have to ASSUME that prices were to stay the same under both situations. Likely, they would not.



3. I think, despite your bachelors degree, that you need to go back and revisit something like the eigth grade before we can go any further. Until you are willing to revisit your math, I refuse to engage you on this topic any further.


Reply- Stop embarrassing yourself. You couldnt successfully engage me on a topic of mathematics with every fiber in your body.


4. Coke costs one dollar. Raising the cost of Coke to $1.30 represents a 30% increase in the cost of Coke.

30 cents of $1.30 represents 23% of the resulting cost of Coke.

If I only raised the cost of Coke by 23% it would only cost $1.23 not $1.30.

Tell me when you have had enough of the math lessons.



Reply-

Im not even going to start insulting you, as tempting as that is. I dont need to sink to your level.

I dont know how much easier I can make this or what different way I can explain it.

You CANT use $1.30 purchase price as a basis for multiplying by 30% since that $1.30 ALREADY represents the full cost (in other words, Joe can buy a certain amount of 1.30 items, INCLUDING TAX for 43k). Are you understanding that?

In order to multiply by .30, you have to FIRST reduce the basis to $1.00. You can multiply the full amount by .23 or the reduced amount by .3, not a combination of the two, which is exactly what you are doing.

The result of this is that you are assuming that Joe is buying the SAME number of items in both scenarios (effectively using the price of goods sold as the ajustable basis instead of the income cap). So, instead of setting the basis at a ceiling of 43k, you just arbitrarily adjusted the fair tax income up to 51k, because you used the wrong basis. That is absolutely incorrect.


5. You are increasingly starting to frustrate me in your inability to understand basic math.

Reply- You can get as pissed as you want, you are wrong, period. You dont understand what you are talking about, and youre using equations to back it up, that dont even remotely prove what you are trying to claim.

2/07/2007 03:14:00 PM  
Blogger Little David said...

From now on I am going to ignore your comments on my blog. (I will reserve the right to go against this statement).

Please note that I will not resort to deleting your comments, which I have the power to do.

I will allow you to pollute my blog with your statements, however I truly wish you would just go and pollute your own blog with your statements.

From now on: Feel free to share your comments. And feel free to have your comments ignored.

2/07/2007 03:29:00 PM  
Blogger Lethal_Poison said...

Im going to let you talk to yourself in peace. After all, its hard to be wrong in an empty room, isn't it? That is exactly the way you like it, and you got it.

Youve proven that when you cant go toe to toe with someone, or you cant handle being wrong, you cower away from it, or result to insults, like a child. Thats fine. You have to live with yourself. Not my problem, and Im tired of smacking the brick wall trying to get you to not only admit you are wrong, but to understand why you are wrong.

So, have fun "yelling into the wind", because the wind is the only thing that is going to ever acknowledge your superiority.

2/07/2007 04:08:00 PM  

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