FairTax in A Minute – How does the FairTax affect wages and prices?

Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.

FairTax.org

Lunch and Taxes: How It Works

The FairTax Basics

The FairTax has been called the most thoroughly researched tax reform plan in recent history. This section offers a quick introduction to the FairTax and tax reform.

Scholarly research tells us that . . .

The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars $358 billion more than the taxes it replaces. [1]

The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan. [2]

Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case. [3]

Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10. [4]

The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be. [4]

Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place. [4]

The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted. [4]

By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent. [4]

Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system. [5]

Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively. [6]

Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax. [7]

Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20. [8]

On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base. [9]

The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent. [10]

References:

[1] Bachman, Paul, Jonathan Haughton, Laurence J. Kotlikoff, Alfonso Sanchez-Penalver, and David G. Tuerck, “Taxing Sales under the FairTax: What Rate Works?” published in Tax Notes, November 13, 2006. Click here to read the full paper.

[2] Tuerck, David G., Jonathan Haughton, Paul Bachman, and Alfonso Sanchez-Penalver, “A Comparison of the FairTax Base and Rate with Other National Tax Reform Proposals,” The Beacon Hill Institute at Suffolk University, February 2007. Click here to read the full paper.

[3] Tuerck, David G., Jonathan Haughton, Keshab Bhattarai, Phuong Viet Ngo, and Alfonso Sanchez-Penalver, “The Economic Effects of the FairTax: Results from the Beacon Hill Institute CGE Model,” The Beacon Hill Institute at Suffolk University, February 2007. Click here to read the full paper.

[4] Arduin, Laffer & Moore Econometrics, “A Macroeconomic Analysis of the FairTax Proposal,” July 2006. Click here to read the full paper.

[5] Kotlikoff, Laurence J. and David Rapson, “Comparing Average and Marginal Tax Rates under the FairTax and the Current System of Federal Taxation,” NBER Working Paper No. 12533, revised October 2006. Click here to read the full paper.

[6] Jokisch, Sabine and Laurence J. Kotlikoff, “Simulating the Dynamic Macroeconomic and Microeconomic Effects of the FairTax,” National Tax Journal, June 2007. Click here to read the full paper.

[7] Tuerck, David G., Jonathan Haughton, Paul Bachman, Alfonso Sanchez-Penalver, and Phuong Viet Ngo, “A Distributional Analysis of Adopting the FairTax: A Comparison of the Current Tax System and the FairTax Plan,” The Beacon Hill Institute at Suffolk University, February 2007. Click here to read the full paper.

[8] Tuerck, David G., Jonathan Haughton, Alfonso Sanchez-Penalver, Sara Dinwoodie, and Paul Bachman, “The FairTax and Charitable Giving,” The Beacon Hill Institute at Suffolk University, February 2007. Click here to read the full paper.

[9] Tuerck, David G., Paul Bachman, and Sylvia Jacob, “Fiscal Federalism: The National FairTax and the States,” The Beacon Hill Institute at Suffolk University, June 2007. Click here to read the full paper.

[10] Walby, Karen, and Dan Mastromarco, “Promoting home ownership: How the FairTax’s benefits for homeowners exceed the mortgage interest deduction,” Americans For Fair Taxation White Paper, August 2006. Click here to read the full paper.

Karen Walby, Ph.D., Director of Research, Americans For Fair Taxation, Jan. 5, 2008.

I believe -


A birth certificate shows that we were born; a death certificate shows that we died; pictures show that we lived!

~~~~~~~~~~~~~~~~~~

Another thing I believe...this is the end of this series 

FairTax in A Minute –What about senior citizens, retired people, and anyone on a fixed income?

As a group, seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system.

Some erroneously believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax, seniors pay $0.23 out of every dollar they choose to spend on new goods and services.

Plus, seniors, like everyone else, receive a monthly prebate, in advance of purchases, for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits.

The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. Pension funds, IRAs, and 401(k) plans had assets of $12 trillion in 2004. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax.

All owners of existing homes experience large capital gains due to the repeal of the income tax and implementation of the FairTax Plan. Seniors have dramatically higher home ownership rates than other age groups (81 percent for seniors compared to 65 percent on average). Homes are often a family’s largest asset. Gains are likely to be in the range of 20 percent.

The FairTax makes the economy much more dynamic and prosperous. Consequently, federal tax revenues grow. This makes it less likely that federal budget pressures require Medicare or Social Security benefit cuts.

FairTax.org

This is Why I forward Email

A man and his dog were walking along a road. The man was enjoying the scenery, when it suddenly occurred to him that he was dead.

He remembered dying, and that the dog walking beside him had been dead for years. He wondered where the road was leading them.

After a while, they came to a high, white stone wall along one side of the road. It looked like fine marble. At the top of a long hill, it was broken by a tall arch that glowed in the sunlight.

When he was standing before it he saw a magnificent gate in the arch that looked like mother-of-pearl, and the street that led to the gate looked like pure gold. He and the dog walked toward the gate, and as he got closer, he saw a man at a desk to one side.

When he was close enough, he called out, 'Excuse me, where are we?'

'This is Heaven, sir,' the man answered. 'Wow! Would you happen to have some water?' the man asked.

Of course, sir. Come right in, and I'll have some ice water brought right up.'The man gestured, and the gate began to open.

'Can my friend,' gesturing toward his dog, 'come in, too?' the traveler asked.

'I'm sorry, sir, but we don't accept pets.'

The man thought a moment and then turned back toward the road and continued the way he had been going with his dog.

After another long walk, and at the top of another long hill, he came to a dirt road leading through a farm gate that looked as if it had never been closed. There was no fence.

As he approached the gate, he saw a man inside, leaning against a tree and reading a book.

'Excuse me!' he called to the man. 'Do you have any water?'

'Yeah, sure, there's a pump over there, come on in.'

'How about my friend here?' the traveler gestured to the dog.

'There should be a bowl by the pump.'

They went through the gate, and sure enough, there was an old-fashioned hand pump with a bowl beside it.

The traveler filled the water bowl and took a long drink himself, then he gave some to the dog.

When they were full, he and the dog walked back toward the man who as standing by the tree.

'What do you call this place?' the traveler asked.

'This is Heaven,' he answered.

‘Well, that's confusing,' the traveler said. 'The man down the road said that was Heaven, too.'

'Oh, you mean the place with the gold street and pearly gates? Nope. That's hell.'

'Doesn't it make you mad for them to use your name like that?'

'No, we're just happy that they screen out the folks who would leave their best friends behind.'

FairTax in A Minute – Is it fair for rich people to get the exact same FairTax prebate from the federal government as the poorest person in America?

Let’s look at a billionaire under the FairTax -- if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a prebate of $4,697 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.

Now, let’s look at a middle-income married couple with no children under the FairTax -- if they spend $50,000, they pay $6,803 net of their prebate for an effective tax rate of 13.6 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent!

FairTax Current tax

Expenditures = income $50,000 $50,000

Net tax $6,803 $7,918

Effective tax rate 13.6% 15.8%

In contrast, if this same couple earns $50,000 in wages today under the current tax system, they pay $4,093 in income taxes and $3,825 in payroll taxes for a total of $7,918 in taxes (15.8 percent) -- a tax burden 14.1 percent higher than under the FairTax. In addition, their employer pays another $3,825 in payroll taxes. Most economists agree that the employer payroll tax is actually borne by employees in the form of lower wages. Looked at this way, this couple is paying $11,743 (23.5 percent) in taxes today, which doesn’t even include the hidden taxes they pay every time they make a purchase.

Finally, let’s look at a low-income couple that spends at the poverty level under the FairTax -- they pay no net FairTax at all. Today, under the income tax system, they not only pay 15 percent in payroll taxes, but they also pay hidden taxes -- arising from corporate taxes, private sector compliance costs, and payroll taxes passed on to consumers and embedded in the price of everything they buy.

FairTax.org

FairTax in A Minute – How does the plan affect economic growth?

With the penalty for working harder and producing more removed, Americans are free to keep every dollar they earn, and a new era of economic growth and job creation is unleashed. Hidden taxes are history, Americans are able to save more, and businesses invest more. Capital formation, the real source of job creation and innovation, is facilitated. Gross domestic product (GDP) increases by an estimated 10.5 percent in the first year alone. The FairTax as proposed raises the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent.

As U.S. companies and individuals repatriate, on a tax-free basis, income generated overseas, huge amounts of new capital flood into the United States. With such a huge capital supply, real interest rates remain low. Additionally, other international investors will seek to invest here to avoid taxes on income in their own countries, thereby further spurring the growth of our own economy.

FairTax.org

I Feel Your Pain. Not Theirs. Yours.

by Ann Coulter

05/27/2009

God save us from liberal "empathy." After President Barack Obama announced his empathetic Supreme Court nominee this week, Judge Sonia Sotomayor, we found out that some people are more deserving of empathy than others.

For example, Judge Sotomayor apparently "empathized" more with New Haven, Conn., government officials than with white and Hispanic firefighters who were denied promotions by the city on the basis of their race.

Let's hope she's as empathetic to New Haven residents who die in fires fought by inferior firefighters as a result of her decision.

In the now-famous firefighters' case, Ricci v. DeStefano, the New Haven Fire Department administered a civil service exam to choose a new batch of lieutenants and captains. The city went so far as to hire an outside consultant to design the test in order to ensure that it was job-related and not racially biased. (You know, just like all written tests were pre-screened for racial bias back when we were in school.)

But when the results came in, only whites and Hispanics scored high enough to earn promotions.

Such results never entice Democrats to reconsider their undying devotion to the teachers' unions that routinely produce students who can't read, write or do basic math. Obviously, disadvantaged children from single-parent homes suffer the most from inadequate public schools -- and their tragic outcome bedevils the entire society for the rest of the students' lives.

Instead, Democrats hide the failure of government schools by punishing the high-scoring whites, Asians and Hispanics, who presumably learned everything they know at home. (If only successfully applying a condom were relevant to firefighting, public school graduates raised in single-parent homes would crush the home-learners!)

So naturally, New Haven city officials decided to scrap the exam results and promote no one.

Seventeen of the high-scoring whites and one high-scoring Hispanic sued the mayor, John DeStefano, and other city officials for denying them promotions solely because of their race.

The district court ruled that there was no race discrimination because the low-scoring blacks were not given promotions either -- citing the landmark case, One Bad Apple v. The Rest of the Barrel. (That's the sort of sophistry we're taught in law school.)

Concerned that Sotomayor's famed "empathy" might not shine through in cases such as Ricci v. DeStefano, the Democrats are claiming -- as Obama spokesman Robert Gibbs said on MSNBC -- that she was merely applying "precedent" to decide the case. You know, just like conservatives say judges should.

This was an interesting claim, in the sense that it was the exact polar opposite of the truth.

To be sure, there is "precedent" for racial discrimination by the government, but Plessy v. Ferguson was overturned in 1954 by Brown v. Board of Education. If Sotomayor had another case in mind, she wasn't telling: The lower court's dismissal of the firefighters' case was upheld by Sotomayor and two other judges in an unsigned, unpublished opinion, titled, "Talk to the Hand."

Not only that, but Sotomayor's fellow Clinton appointee, Jose Cabranes (who sounds like an "empathetic" fellow), issued a blistering dissent from the appellate court's denial of a rehearing specifically on the grounds that the case "raises important questions of first impression in our Circuit -- and indeed, in the nation."

A "case of first impression" means there's no precedent. If there were a precedent, it would be a case of, at least, "second impression."

If it were merely "empathy" that explained liberal judges' lawless opinions, one might expect some liberal judges to have empathy for the white and Hispanic firefighters being discriminated against today, and others to have empathy for the hypothetical black firefighters discriminated against in times past.

But all liberals only have empathy for the exact same victims -- always the ones that are represented by powerful liberal interest groups. As Joe Sobran says, it takes a lot of clout to be a victim.

Thus, the media and Democrats seem to find successful Hispanic attorney Sotomayor much more "empathetic" than successful Hispanic attorney Miguel Estrada.

After aggressively blocking Estrada's nomination to a federal appeals court during Bush's first term solely on the grounds that he is Hispanic and was likely headed for the Supreme Court -- according to Senate Democrat staff memos -- now Democrats have the audacity to rave that Sotomayor will be the first Hispanic Supreme Court justice!

If Sotomayor is not more empathetic than Estrada, liberals at least consider her more Hispanic -- an interesting conclusion inasmuch as Sotomayor was born in New York and Estrada was born in Honduras.

Forty-four of 48 Senate Democrats voted to filibuster Estrada's nomination to the D.C. Circuit Court of Appeals, with congressman and professional Hispanic Raul Grijalva assuring them that just because "he happens to be named 'Estrada' does not give him a free ride."

The truth is liberals couldn't care less about Sotomayor being Hispanic. Indeed, liberals often have trouble telling Hispanic people apart, as James Carville illustrated on "Good Morning America" Wednesday morning when he kept confusing Miguel Estrada with Alberto Gonzales.

"Empathy," in Liberalspeak, is nothing but raw political power.

It sure is hard to get really angry at someone when you can think of all the reasons you love them.- The Universe

Couple Ordered to Stop Holding Bible Study at Home Without Permit

Thursday , May 28, 2009

Pastor David Jones and his wife Mary have been told that they cannot invite friends to their San Diego, Calif. home for a Bible study — unless they are willing to pay tens of thousands of dollars to San Diego County.

"On Good Friday we had an employee from San Diego County come to our house, and inform us that the Bible study that we were having was a religious assembly, and in violation of the code in the county." David Jones told FOX News.

"We told them this is not really a religious assembly — this is just a Bible study with friends. We have a meal, we pray, that was all," Jones said.

A few days later, the couple received a written warning that cited "unlawful use of land," ordering them to either "stop religious assembly or apply for a major use permit," the couple's attorney Dean Broyles told San Diego news station 10News.

But the major use permit could cost the Jones' thousands of dollars just to have a few friends over.

For David and Mary Jones, it's about more than a question of money.

"The government may not prohibit the free exercise of religion," Broyles told FOX News. "I believe that our Founding Fathers would roll over in their grave if they saw that here in the year 2009, a pastor and his wife are being told that they cannot hold a simple Bible study in their own home."

"The implications are great because it’s not only us that’s involved," Mary Jones said. "There are thousands and thousands of Bible studies that are held all across the country. What we’re interested in is setting a precedent here — before it goes any further — and that we have it settled for the future."

The couple is planning to dispute the county's order this week.

If San Diego County refuses to allow the pastor and his wife to continue gathering without acquiring a permit, they will consider a lawsuit in federal court.

Click here to watch the full FOX News interview.

Click here to read the full 10News report.