Sunday, July 10, 2011

The following discussion is geared toward people who already know at least a little about the FairTax, a proposed federal law filed as H.R. 25 in the U.S. House of Representatives, and S. 13 in the current session of the Senate. To learn more about the FairTax, visit www.FairTax.org.

It is time to stop the nonsense about whether the FairTax is "23 percent inclusive" or "30 percent exclusive," and get real. The only important question is how will the FairTax affect YOU. News Flash: if you think you will pay either 23 or 30 percent, you are most likely way off the mark.

In a moment, you will be able to see almost to the penny what the FairTax will actually cost you. You will be able to cross-match your family's size with what you spend annually (notice, this is about spending, NOT what you earn. Under the FairTax what you earn will be nobody's business but your own). 

Using these tables, you will be able to view the actual percentage and dollar amount you can expect to pay. Keep in mind, as you view these numbers, this is all you will pay in federal taxes because the FairTax replaces all forms of federal taxes on income. Under the FairTax you "Keep Your WHOLE Paycheck" (minus deductions for 401K, health insurance and local/state taxes, of course).

First, let's put the 23% versus 30% to rest. The following tables will demonstrate there is not one iota of difference to your bottom line, no matter which way you want to calculate the FairTax. That is thanks to the Prebate, as you will see.

These tables make two things abundantly clear. First, regardless what the demagogues claim, the FairTax protects the poor and progressively taxes the "rich" based on the amount they spend. Second, most Americans won't pay anywhere near 23 (or 30) percent.

Want to directly communicate your support for the FairTax to your members of Congress? After viewing the following tables, go here to open a "PopVox" page and vote for H.R. 25,  then go here and vote for the Senate version, S.13.



(NOTE: The tables that follow can be confusing at first glance. Here's how to make them simple. Take your own family's gross annual income, and for sake of argument call it the "Amount You Spend." Look for that column in the appropriate table (2 thru 5). Come down that column to the row matching your family size. That is the ONLY block of data you need. Taken in total, though, the tables reveal a lot more information.)

TABLES THAT FOLLOW:
1. How the Prebate Makes the FairTax a Fair Tax 
2. Actual 23% INCLUSIVE FairTax rates for 2 Adult Households
3. Actual 30% EXCLUSIVE FairTax rates for 2 Adult Households
4. Actual 23% INCLUSIVE FairTax rates for 1 Adult Households
5. Actual 30% EXCLUSIVE FairTax rates for 1 Adult Households




Table 1: How the Prebate Makes the FairTax a Fair Tax.


Table 2. Actual 23% INCLUSIVE FairTax rates for 2 Adult Households
To verify the following calculations are correct, compare the $40,000 spending line for a family of 2 Adults/2 Kids in Table 1, above, with the red box on the following table (scroll to the right, if necessary). 
Page 2 of Table 2, 2-Adult Households, Spending $100,000 per year to $50 Million.

The above tables were for 2-Adult Households based on a 23 percent inclusive FairTax. 


Table 3. Actual 30% EXCLUSIVE FairTax rates for 2 Adult Households
Next, let's look at a 30 percent exclusive FairTax for those same 2-adult households. Once again, check out the numbers inside the red box. Notice, just as soon as the Prebate is included, these numbers become identical to those in the previous table. So, who is kidding whom with this "30 percent" horror?
Page 2 of Table 3, calculating a 30% exclusive FairTax for 2-Adult Households, Spending $100,000 per year to $50 Million.

Now, let's look at households headed by a single adult. 

Table 4. Actual 23% INCLUSIVE FairTax rates for 1 Adult Households
Page 2 of Table 4, 1-Adult Households, Spending $100,000 per year to $50 Million, with a 23% inclusive FairTax.
Table 5. Actual 30% EXCLUSIVE FairTax rates for 1 Adult Households
Last, but not least, here are the single-adult household calculations with the so-called 30 percent exclusive FairTax. Once again, the difference between inclusive and exclusive is zilch.

Page 2 of Table 5, calculating a 30% exclusive FairTax for 1-Adult Households, Spending $100,000 per year to $50 Million.

1 comment:

  1. Dave,

    Despite what AFFT wants you to believe, the prebate is not a tax refund, but a $600 billion annual cash grant entitlement which can be saved, or spent and taxed as needed. Unlike a tax refund, the prebate increases your gross annual income significantly. Just look in your checkbook for confirmation.

    I believe you should have added the prebate amount in column two, and column three should have reflected the new gross available for spending.

    Regarding all the red ink on some of the charts, does that mean that at that income level, no net federal taxes are being paid? I suppose that all of them will still get their full SS retirement benefits, won't they? How many such "moochers" do you think there may be?

    A minor point, but AFFT jiggered the HHS poverty level numbers to eliminate a perceived marriage penalty. For instance, a family of four poverty level is around $23,000 according to HHS. The AFFT prebate is based on a poverty level of $29,000 for the same family. That certainly increases the number of "moochers" significantly, doesn't it?

    I have been studying and debating the Fairtax scheme for nine years while retired, and would be happy to discuss anything Fairtax with you.

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