Second, Fair Tax Questions and Advantages

This video follows the prior video "First, Why We Need the Fair Tax". It answers questions about the Fair Tax, how it affects people at different income levels, its advantages, how it increases the well being of Americans by $1 trillion per year, and what you can do.

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[1969was1969]

One of the "tricks" of the Fair Tax: backers will claim their models show the economy is "better",GDP up, but it depends on how one defines "better", as having a higher GDP does NOT mean that the increase is going to all citizens. HOW is the GDP increase achieved? By taxing the middleclasses more, in effect making them work MORE to have to have the same life as now, while the income of the wealthy skyrockets at lower tax rates than they pay now. Yes, the wealthy would have it "better"....

[DanDyer4]

@1969was1969 Research by Kotlikoff and Rapson shows that current federal marginal tax rates on labor are higher than they would be under the FairTax for all of the stylized single and married households he considered at 42 income levels. (NBER Working Paper No. 15233, revised October 2006, "Comparing Average and Marginal Tax Rates under the Fair Tax and the Current System of Federal Taxation.")

[1969was1969]

The "savings would increase" argument does not work...

if it were to pass (it won't, thank goodness), many would spend all of their savings BEFORE it was enacted, thus avoiding the price increases(remember, if "everyone keeps their whole paycheck", then end prices rise about 20-27% upon addition of the tax). IF people save more after enacted, the tax rate has to increase (revenue neutral, remember).

This tax is just a bad idea, increasing the middleclasses avg. federal taxes.

[DanDyer4]

Your claim that prices will rise 20-27% is not correct. The following business costs will go away: (a) 15.3% payroll tax, (b) 33rd highest corporate tax rate among 34 OECD countries, (c) "tax-efficiency" costs estimated by GAO as 2 to 5% of GDP, and (d) tax compliance costs (estimated at 15% for very small businesses that create jobs). More savings will create more investment, innovation, jobs, growth, and higher future living standards.

[1969was1969]

@DanDyer4 a)"15.3% payroll tax" No, if people keep their whole checks only 7.65 of that goes away, and that is not 7.65% of cost-of-goods, it is 7.65% of wages, so AT MOST likely about 2% of cost of goods overall.

b) "corporate tax rate among 34 OECD countries" -- Corporate tax rates do not have a direct effect on prices, they are an after-effect, taken from profits-- however, EVEN if we assume they do, they would amount to about 1.25% of the COG. (continued)

[DanDyer4]

One of your comments is incorrect, the other is misleading.

(a) The payroll tax goes away, so BOTH components go away, the 7.65% paid by the employer AND the 7.65% deducted from the employee's paycheck.

(b) You agree that corporate tax rates have an effect on prices, even if they are indirect.

[The1stHNIC]

MuckRaker85 I have run a business before and maybe you have also. Example: Best Buy & Circuit City are across the street from each other. I'm on the 3rd corner your on the 4th. so that I can compete with big box and you I lower my prices 15%. You lower your 17% to compete with me. Now were competing with big box retailers who chose not to lower prices but who are now loosing because we now have more door traffic. You see it everyday with gas stations. Whats stops one from charging $10 per gallon

[gt8595b]

thanks dandyer, great videos and explanations!

[1969was1969]

@DanDyer4 "More savings will create more investment" this is not really true, but assumming it is-- fair tax is set at 23% of current sales to be revenue neutral. If people start saving more (albeit unlikely for the middleclases, since they will pay more in taxes then just to stay at the same level as now), and sales sink, the taxrate has to go up to maintain the same revenues, and sales sink more, and the rate goes up, and-- well, it is clear the economy would collapse if people saved much.

[1969was1969]

@DanDyer4 c) Tax efficiency would not drop to 0% (that is a no tax at all situation),and as the GAO themselves state "However, the actual efficiency costs of the current tax system may not fall within this range..."

d) "15%" is a very dubious number, e.g. would a dentist with overall costs of $1million a year pay $150,000 in "tax compliance costs" (i.e, accounting work)? Highly unlikely.Would need a source on that. As someone who has owned several small businesses, it seems to run at most 1-5%.

[laudanum4u]

@FairTaxisaLie sorry dude. you have something close to one of his 20 screen names. no offence intended. as far as your comment. I know the source now. you're not misquoting. I'll even agree. I just feel the middle class will benefit from the economic boost, the Fairtax allows for,.that will more then make up for it. anyone with even a touch of savvy for investing will make a ton. just my opinion

[FairTaxisaLie]

@laudanum4u My name is not Mark, don't get paranoid. Those numbers, official data, include all federal income, social insurance, corporate, and excise taxes. The only folks who would pay less under FT/NASTI are those making less than $10,000-$20,000 a year (who will be a few hundred dollars better off), and those who make more than $150,000 a year (who will be tens of thousands to milliions of dollars better off). Those in the middle would pay more in federal taxes and be worse off.