Ned6 Wrote:
Jul 30, 2012 11:56 AM
In theory, a VAT tax of 33.3% [$25 tax on core $75 cost]; a FairTax of 25% [$25 tax out of $100 final cost]; and a Flat tax of 25% [$25 tax on earned income and profits making up the $100 final cost]; all result in a final cost of $100. The $25 tax is always paid by the consumer of the product or service. In practice however, a shift from an income tax to either a VAT or FairTax will not result in $100 final cost, unless the embedded income tax portion of gross earned income is extracted first. Conservatively assuming that the ratio of earned income to profits is 4:1, and that the tax on profits will be un-embedded, but gross salaries will stay the same; the inflation-like effect on prices will be 26.6% [$95 cost plus $31.6 = $126.6].