FairTax - Math Fallacies

If you understand that there is already about 23% tax embedded in products/services that are largely dependent on US labor you can make a breakthrough about the FairTax.

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http://ytknight.wordpress.com/

Cheers,

YK

First, it doesnt make ANY difference is you think fairtax will lower prices 22 percent. Fairtax won't lower prices, it will increase them substantially.


But EVEN if Fairtax lowered prices, it doesnt make ANY difference when it comes to the IMPOSSIBILITY of the government paying itself a tax.

The government can not PAY itself a sales tax anymore than it can pay itself an income tax.

When the government WRITES itself a check, it has to PAY the check. So it's not a net income.

If the government -- or anyone -- wrote itself a check for a 100,000 dollars a day, at the end of 10 days, it does NOT have a million dollars.

Its just the dumbest thing imaginable. The government CAN NOT possibly pay itself a tax and count that as income.

If the government could write itself a check and count it as income -- thats a perpetual economic magic pill. Its insane.

And Fairtax is based on that insanity.

Have you read any of the FairTax books? They address your concerns better than I can.

On the government paying the tax, we can agree that the gov't paying a tax to itself is a wash. But are you suggesting that gov't vendors have taxed and untaxed pricing (for gov't and non-gov't)? How about state taxes... Do state vendors untax state gov't purchases? Why not keep it simple at the collection side (at the point-of-sale) and allow the system to work that way?

On the issue of prices lowering... Any self-employed person will tell you that the gov't takes 15.3% right off the top of his earnings for FICA and Medicare... Take an independent consultant who charges only for his time and a $100/hr bill-rate for round numbers... At/near $15 of every $100 goes to the gov't just for FICA/Medicare anyway. If he pays Federal Income taxes as well and, let's assume he pays a CPA to do his taxes, and factor in the time it takes for him to keep his tax records, why is it difficult to see 20-26% of taxes embedded in current pricing? Take all that embedded tax away and allow free-market forces kick in and, yes, the rates would lower some (not rise).

Peace,

YK

No, thats incorrect. Businesses can't cut their prices 23% cause of these "embedded taxes"

Ford and GM for example, don't have near 23% embedded taxes because they don't pay one dime of the biggest embedded taxes -- corporate income tax.

Corporate income tax, and FICA, are by far the biggest embedded taxes. Ford and GM pay NO corp income tax because they have lost money.

You only pay corp income tax on your PROFIT.

Ford and GM both pay about 200 dollars per car in FICA.

Other businesses have studied this -- and said they didn't save NEAR 22%, more like 2%.

But Fairtax would add a 23-30% tax to every car and truck GM sells in USA. It saves them 200 dollars, but adds 5,000 dollars or more. It would be drastic for the auto industry.

I know Fairtax has this notion that every price will drop -- and people will have their "entire paycheck" to pay this tax.

Thats wrong too. In fact, fairtaxgroups.com web page tells me that Fairtax NEVER even implied that people will keep their gross pay. They say anyone that thinks people will have more take home pay don't understand the fairtax.

Plus -- lot of people don't have paychecks. Nursing home patients for example, cancer victims are often not working.

Fairtax sounds nice-- it sounds great -- but in practice it actually backfires.

The REAL fairtax rate -- to collect enough revenue -- would have to be 50 or 60%, and that would be impossible. People would do everything to avoid such taxes.

Sorry Skeptic. Simply not true.

The truth is that our current tax system chases jobs, capital, and opportunity overseas and it tilts the playing field in favor of Big Business and politicians with lobbyiest friends.

Half-truths are simply misinformation. The full truth is that Ford & GM pay their employees a working wage which includes 6.2% FICA and 1.45% Medicare and the corporation matches the employee contribution (for a total of 15.3%). This would be saved even if the corporation didn't make a profit. If your corporation has the has the lofty goal of solving the energy problem (coming up with an oil alternative) & it takes $10 million of R&D labor/wages, the Fed is going to get their 1,500,000 before this company makes dime #1! Our income tax experiment is 96 years old & was developed in the industrial revolution when the US was becoming a global powerhouse. Now we have fierce global competition. We need to give our 96 year-old tax system a nice funeral and move to a more sane system.

Skeptic, have you read the FairTax books By Neil Boortz? You will get the truth if you do.

Peace,

YK

Yes I read the Fairtax book four times.

Especially page 148, "The federal government itself will become a MAJOR taxpayer"

Major taxpayer -- to itself? Do tell do tell.

Thats absurd, actually. Not a little absurd -- its a farce. The federal government CAN NOT possibly pay itself any taxes, much less become a "MAJOR" taxpayer.

Because the GOVERNMENT has to write the check, to itself, it can't count that as income.

To believe all these magical things are going to happen -- fairtax FIRST has to make the government become a major taxpayer.

And then -- fairtax has to actually collect the highest sales tax on earth on things like nursing home patients, cancer victims, ALS sufferers.

Plus -- fairtax has to collect the worlds highest tax on rent -- no other country even taxes rent.Or medical care. But fairtax puts the HIGHEST SALES tax on earth on these things.

Plus - you will be taxed on all your utility bills -- your rent, your food, things you are not taxed on now, will get the LARGEST sales tax on earth.

The federal gov't is one of the largest employers in our nation. You don't think that every wage that the U.S. government pays now includes FICA and Medicare? It pays itself taxes under our current system. Be real Skeptic.

Hey, I am in the software development business. Companies can use 20 year-old Cobol on old mainframe computers if they like but the software industry evolves and we have a new understanding of what is possible year after year. Point being is that every now and then software systems are rewritten from scratch to (a) leverage the new unfolding understanding of technologies and (b) to get away from old restrictive unsupportable code.

If I sat down and truly studied it, I could probably explain the intent behind each page of the 133 page FairTax code. Care to take a stab at the 96 year-old work-in-progress that is our current tax code?

Time to flush out the old and give our country a fresh start.

Peace,

YK

Just curious...

What is it that you like about our current tax system?