FairTax Estimated Revenue And Revenue Neutrality
We have already estimated the tax base for the FairTax (using 2003 data) as $9246.2 billion dollars.
Computing the revenue for the FairTax is then fairly straight forward.
23%*$9246.2 billion = $2126.6 billion dollars.
We have previously figured the cost of the prebate at $502.4 billion dollars.
So the net revenue from a 23% FairTax (with 2003 data) is:
$2126.6 - $502.4 = $1624.2 billion dollars.
We have previously figured the amount of revenue the FairTax must replace (using 2003 data) as $1660.5 billion dollars.
So our back of the envelope calculation of estimated FairTax revenue using 2003 data is within $36 billion dollars, or 2% of the actual amount of revenue we need to replace. Given the somewhat crude nature of our figuring, this is not unexpected. However it should show clearly that the 23% FairTax rate being revenue neutral rate is plausible.
So what would the FairTax rate have to be to be exactly a revenue replacement for the 2003 data? Well, the revenue we are seeking to replace is $1660.5 billion dollars. The prebate adds another $502.4 billion dollars. So we need to raise a total of $2162.9 billion dollars from the FairTax, on a tax base of $9246.2 billion. $9246.2/$2162.9 = 23.4%. So you can clearly see, that the 23% FairTax rate is in the right ballpark for revenue neutrality.