Saturday, August 20, 2005

Estimated Prebate Costs

The FairTax provides a prebate to each household each month to reimburse the amount that household would pay in tax if it spent up to the poverty level for a household of it's size. When trying to compute the revenue neutral rate for the FairTax, you MUST take into account the cost of providing this prebate.

The Department of Health and Human Services Poverty Guidelines for 2003 defines the poverty line as $8,980 per household, plus $3,140 for each additional dependent in that household. Due to the FairTax's anti-marriage penalty clause however, it is reasonable to expect that the Family Consumption Allowance under the FairTax will effectively be $8,980 for each adult, and $3140 for each child (using 2003 data). This yields an annualized prebate cost of 23%*$8,980 = $2065.4 per adult and 23%*$3140 = $722.2 per child.

According the the US Census Bureau's Population Estimates, in 2003 there were 73,050,146 people in the US under 18 and 217,738,830 adults over the age of 18.

So the total cost for the prebate using 2003 data would be:

$722.2 * 73,050,146 + $2065.4 * 217,738,830 = $52.7 billion + $449.7 billion = $502.4 billion

So the estimated prebate cost using 2003 data is $502.4 billion dollars.

2 Comments:

At 4:41 PM, Blogger Milliscent Morgan said...

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At 10:26 PM, Blogger Unknown said...

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