Comments on: The Fair Tax and the Elderly http://www.adamsweb.us/blog/the-fair-tax-and-the-elderly/ Fighting a never ending battle... Thu, 26 Jan 2012 22:04:59 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Adam Graham http://www.adamsweb.us/blog/the-fair-tax-and-the-elderly/comment-page-1/#comment-38545 Adam Graham Mon, 31 Dec 2007 00:52:41 +0000 http://www.adamsweb.us/blog/the-fair-tax-and-the-elderly/#comment-38545 The purpose is to make it easier to compare to the income tax. The Income Tax is an inclusive tax. To calculate it, we take your total income and we take a percentage of it. "I.E. your income tax is 25% of your taxable income." The way we consider a sales tax is that we take the price and then we add the tax. Thus, "The price of the good is a dollar, we add cents and the total price is $1.06" So what we're doing is comparing a tax-inclusive income tax with a tax-exclusive sales tax. So calculating the Fair Tax as a tax-inclusive rate gives us an ability to compare apples-to-apples. Of course, we could also do this by making everything exclusive: The Tax is 30%, the cost of embedded taxes in 28-29% and then we could also convert all the Tax-Inclusive Income Tax Rates into Tax-Exclusive Rates by taking the total tax and dividing by after-tax income. So thus, we can take the 10%, 15%, 25%, 28%, 33%, and 35% brackets and say that as Tax-Exclusive rates they're now 11%, 18%, 33%, 39%, 49%, and 54%. Or maybe, we can just leave the income tax rates as they are and say the Fair Tax is 23%. As for honesty, the only thing I would think would be dishonest is if I were to compare an inclusive and an exclusive rate in order to prove my point. If I said, "Embedded Taxes on average add 28-29% to the cost of goods and services. A 23% fair tax eliminates that burden, thus saving money." Of course, embedded taxes do add 28-29% to the costs of goods and services, but comparing an exclusive addition to an inclusive tax would be incorrect, so thus we say, "Embedded Taxes make up 22% of the price of goods and services." So, we have a more accurate picture by comparing like things as opposed to unlike things. The purpose is to make it easier to compare to the income tax.

The Income Tax is an inclusive tax. To calculate it, we take your total income and we take a percentage of it. “I.E. your income tax is 25% of your taxable income.”

The way we consider a sales tax is that we take the price and then we add the tax. Thus, “The price of the good is a dollar, we add cents and the total price is $1.06″

So what we’re doing is comparing a tax-inclusive income tax with a tax-exclusive sales tax. So calculating the Fair Tax as a tax-inclusive rate gives us an ability to compare apples-to-apples.

Of course, we could also do this by making everything exclusive: The Tax is 30%, the cost of embedded taxes in 28-29% and then we could also convert all the Tax-Inclusive Income Tax Rates into Tax-Exclusive Rates by taking the total tax and dividing by after-tax income. So thus, we can take the 10%, 15%, 25%, 28%, 33%, and 35% brackets and say that as Tax-Exclusive rates they’re now 11%, 18%, 33%, 39%, 49%, and 54%.

Or maybe, we can just leave the income tax rates as they are and say the Fair Tax is 23%.

As for honesty, the only thing I would think would be dishonest is if I were to compare an inclusive and an exclusive rate in order to prove my point. If I said, “Embedded Taxes on average add 28-29% to the cost of goods and services. A 23% fair tax eliminates that burden, thus saving money.” Of course, embedded taxes do add 28-29% to the costs of goods and services, but comparing an exclusive addition to an inclusive tax would be incorrect, so thus we say, “Embedded Taxes make up 22% of the price of goods and services.” So, we have a more accurate picture by comparing like things as opposed to unlike things.

]]> By: Bubblehead http://www.adamsweb.us/blog/the-fair-tax-and-the-elderly/comment-page-1/#comment-38542 Bubblehead Sun, 30 Dec 2007 23:46:56 +0000 http://www.adamsweb.us/blog/the-fair-tax-and-the-elderly/#comment-38542 Any reason why "Fair Tax" supporters keep calling it a "tax inclusive" 23% instead of what it really is -- a 30% tax? If it's so good, just be honest about it. Otherwise, when you complain about the current sales tax, I suggest you call it a 5.66% "inclusive tax". Any reason why “Fair Tax” supporters keep calling it a “tax inclusive” 23% instead of what it really is — a 30% tax? If it’s so good, just be honest about it. Otherwise, when you complain about the current sales tax, I suggest you call it a 5.66% “inclusive tax”.

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