Quote:
Originally Posted by m21sniper
Brunette. (Not posting pix, sorry)
Jyl i think medicare/ss, etc are their own separate taxes, and would not be part of a move to a federal "sales only" taxation system.
What do the numbers look like if you take that out?
|
If I set FAIRTAX rate to generate $1.8 trillion revenue (replacing indiv income tax, corp income tax, excise and other - but
not replacing social insurance taxes) then rate can be 30% if applied to all consumer spending.
At 30% FAIRTAX rate, quintiles 1 through 4 of households are still in deeper deficit than before. Quintile 4 (household income between $36K and $58K) goes from saving $2,500/yr under current system to deficit of $2,000/yr. Quintile 3 to deficit $8,970/yr. However, Quintile 5 is now better off, their savings increases from $28,000/yr to $32,600/yr.
(One caveat: the model calculates the savings or deficit with FAIRTAX by assuming that pretax income equals after tax income. If social insurance taxes still exist and come out of pretax income then the households are worse off than I described above. But I guess we're assuming medicare/SS somehow get funded some other way, not from paychecks and also not from FAIRTAX?)
Basically, as we plug different FAIRTAX rates into the model, the highest-earning households tend to do better and the lowest-earning households tend to do worse. This makes sense. High-earners pay more income tax and they spend less,
relative to their income. So if you tax income less and tax spending more, that tends to be relatively better for the high-earners. For low-earners, just the opposite.
Now, I see that FAIRTAX proposal includes a "pre-bate" to lower-earner households. But the proposed pre-bate appears far too small to make any impact, based on this website which I admit I have not had time to really study.
http://fairtaxfraud.com/fallout.asp
What they don't tell you up front is that the maximum prebate per person is only $187 per month and they are only refunding the "FairTax" tax a person at the poverty level would pay.
Interestingly, it doesn't look like FAIRTAXers can avoid hurting quintiles 1-4 - i.e. leaving their Savings(Deficit)InclFAIRTAX same as the current Savings(Deficit) - simply by increasing the size of the pre-bate check. Because if you still want the government to get the same revenue from FAIRTAX despite diverting big chunks of FAIRTAX checks to quintiles 1-4, you have to raise the FAIRTAX rate to get more tax from quintile 5. But as you raise the FAIRTAX rate, you have to write even bigger checks to quintile 1-4. The problem spirals and there is no solution.
(FYI when we discussed FAIRTAX about 1 year ago, I found some skeptics' websites that claimed the true revenue neutral FAIRTAX rate would have to be over 40%. Now I see how they calculated that, and I believe they were/are right. )