FairTax Mathematics.

I've been doing some reading on Mises.org.

And I'm really jumbled about the Math on the FairTax.

We all know the $100 example.

But let's say something cost $500.

23% of 500 is 115.

therefore you'd be paying $385 and $115 would be going to the federal government.

Now, $115 is 29.87% of 385. You get the same percentage. I know its inclusive, but you still come up with that magic 29.87% number.

And although the cost of the item you are purchasing wouldn't change that much since you're getting rid of the tax burden, around 33%, which is included in the prices of good, still 29.87% of what the item without the FairTax costs is still going to Federal Government.

Yes, there is a 23% inclusive tax.

But we could be paying almost 30% less on all goods if we just weren't taxed at all.

For example, if around 33% of the price of an item that costs $500 is an embedded tax to make up for the income tax, then inclusively the price of the item without the income tax would be $335.

However with the FairTax, the price that isn't the FairTax is $385. That doesn't add up in my mind. Shouldn't an inclusive tax of 23% make the price of the item that isn't taxed lower?

I think that's why Ron Paul doesn't support the FairTax, directly. He knows it still gives way too much of our money to the government.

I will definately still support the FairTax, because ANYTHING is better than our current tax code, however, I do think it needs an expiration date to give us time to cut spending OR add a spending reduction plan within the bill. Spending is causing more of our downfall than taxation.

Not trying to start a large argument, just trying to get through the crazy math. I think where John McCain is wrong is that he's trying to scare you to make you think the FairTax will add 30% on every good.

My point is, that without the FairTax, the price of goods would go down.

You are right about the costs being higher with a FairTx or income tax, but when you eliminate our current tax code, it almost balances out. The costs of the federal income tax are passed down along the multiple stages of production in a good or service, so that the price of the finished product is increased to cover the costs of taxation. Interestingly enough, the total average tax component of most finished goods is approximately 22%.

Alright. I gotcha.

But I still believe their should be an expiration in the FairTax plan as well as a limit on spending, otherwise, I think it could open as many doors for government abuse as the current tax code.

Still, No matter how you cut it.

Inclusively or Exclusively, I think we're giving too much money to the Federal Government.

Although the inclusive tax is 23%, there is still an exclusive tax of 29.87% on the price of all new goods. But at least we'll have more money to spend to make up for it.