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Bill Pelland
Joined: 25 Feb 2008 07:34 am
Posts: 108
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Posted: 09 May 2008 08:40 am
Post Subject: The 'UN' FAIR TAX Read Article
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Margin vrs Markup:
In a previous response to my letter on fair tax, Jim Johnson wrote:
You seem like a very intelligent man. What is with you latest letter to the web editor? If you buy a $100 worth of food, or any product for that matter, the tax will be $23 for a total of $123. If you buy $77 worth of food, your total will be $94.71. |
Read my original article and you will see I quoted the bill now before the house. The rate noted their is a Tax margin; not a tax markup.
If you markup a 50 cent item by 100% you will sell the item for $1.00, your profit will be $.50 and your profit margin will be 50%. Now look at the language in the bill:
`(b) Rate-
`(1) FOR 2007- In the calendar year 2007, the rate of tax is 23 percent of the gross payments for the taxable property or service. |
This bit of double talk means of the 100.00 paid for a service, 23.00 will be tax. This is a tax margin of 23% but to get there you markup the item 30%. Our sales tax rate of 8.25% is a tax markup. The margin rate on a sales tax rate of 8.25% is 7.62%.
Type in Fact Check into your browser and you will find a website that is neutral and checks these things out. Don't take my word for it. The information is out there.
Vote Obama for President - Noriega for US senate.
Bill Pelland
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Bill Pelland
Murchison Tx
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Walt Curtis
Joined: 02 May 2008 07:26 pm
Posts: 6
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Posted: 09 May 2008 07:17 pm
Post Subject: Re: The 'UN' FAIR TAX
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You are exactly right about the rate, Mr. Pelland. The Fair Tax is actually a 30% sales tax on consumers collected by a business. The business would then, in turn, remit 23% of the gross sales amount (collected tax included) to the government. I did not realize this until your post today caused me to reread the text of the Fair Tax legislation. Thank you for that. Incidentally, I recently submitted a Letter to the Web Editor claiming you were wrong, and that the Fair Tax was a 23% tax on consumers. I guess if I speak out enough, I'm bound to occasionally put my foot in my mouth! Hopefully, they won't print it as I see they already posted another with similar subject matter. If they do, however, let me apologize to you in advance.
Despite this admission, I still believe the Fair Tax would be a tremendous benefit to our economy and the nation as a whole. It is not, as you claim, "just another scheme to shift the entire tax burden in this country to the poor and middle class". In truth, it is a progressive tax. This is because as part of the Fair Tax Act, all American households will receive an annual tax exemption, in the form of a monthly rebate paid in advance, on all spending up to the poverty level. For a family of four, this amounts to $27,380 each year in tax-free spending. It is only after this amount is reached that the 30% sales tax will take effect. Thus, a family who consumes an amount equal to the poverty level will pay no taxes. A family who consumes twice the poverty amount, and thus currently falls into the 15% bracket, would pay an effective rate of the same 15%. Don't forget, though, that the Fair Tax Act includes a repeal of the 7.65% payroll tax that is automatically deducted from working Americans' paychecks. For when this is accounted, the 15% tax bracket into which most American taxpayers currently fall is actually a 22.65% bracket, and as such, many low-income earners will actually see their tax burden reduced under the Fair Tax.
To fully explain the burden that each income level would carry under the Fair Tax, consider a family of four who spends $200,000 annually. As with the family above, this family would be allowed to spend $27,380 tax free and would pay a 30% rate thereafter. This results in an effective rate of 25.89%. A family of four who spends $500,000 annually would pay a rate of 28.36%. Therefore, one can see that under the Fair Tax, the heaviest tax burden as a percentage of consumption will be carried by those who spend the most.
Don't forget, as well, that the Fair Tax Act of 2007 also includes a repeal of the corporate income tax. This means the cost of goods and services will fall from their current level because business will no longer have to account for tax liabilities when setting the price of their product. This should be of special interest to those on fixed incomes because, contrary to your claim, their expenses will not automatically rise.
As for how the 23% rate was set, it is true that the Fair Tax Act only establishes 23% as the rate of the first year. The total tax rate, as you mentioned in your letter, is set as a combination of the general revenue rate, the old-age, survivors and disability insurance rate (Social Security), and the hospital insurance rate (Medicare). This is the equivalent of what Americans currently pay in personal income tax combined with the payroll tax deducted from their pay check. The Fair Tax is calculated to be revenue neutral, meaning that the total revenue to the treasury received from the Fair Tax will be the same as under the current system. Therefore, the Social Security and Medicare rates are set at a level that will provide the same revenue the payroll tax would have produced. Raising the Social Security and Medicare rates in response to an increasing number of retirees could happen in either system, and as such is not a reason to discredit the Fair Tax.
The only way the Fair Tax will get through Congress is if Americans demand it. Congressman Ghomert is not currently listed at fairtax.org as being a supporter, so if it is something those in his district would like to see passed, Tylerites need to let him know.
Walt Curtis
Dallas
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