Saturday, August 20, 2005

The Tax Base under the FairTax

Under the FairTax, all consumption of new goods and services (except tuition for education) is taxed at the same uniform rate.

The Bureau of Economic Analysis (BEA) keeps data on aggregate national personal consumption expenditures (PCE) as part of its National Income and Product Accounts (NIPA). If you are curious you can see how the BEA defines Personal Consumption Expenditures.

For 2003, the total PCE was $7709.9 billion dollars, of which $200.4 billion was for education and research. So the PCE contribution to the FairTax tax base is $7709.9 - $200.4 = $7509.5 billion.

The FairTax also taxes government consumption. The BEA keeps data on government consumption as well. For 2003, government consumption was $1,736.7 billion dollars.

So the total FairTax tax base is $7509.5 + $1736.7 = $9246.2 billion dollars.


At 3:31 PM, Blogger Mark said...

Thanks for the figures. It does actually show every dollar of government consumption (1.7 trillion in 2003) will "carry" (pay) the sales tax. There is no exemption for miilitary.

And I realize WHY you cant exempt the military. If you did, the 23% would work out, math wise.

Im really concerned about the logic and math of this. Yes, you COULD just force the military, army, navy to cough up and extra 220 billion. But to PAY that -- am I the only one that sees a problem? Wouldnt the Army and Navy have to GET more money, to PAY those billions?

I think one of two things will happen, with the same effect either way. Either the military will get exemptions from paying it -- or it will have to get higher budgets to pay it. And then, you just add 220 billion to the budget.

At 6:14 PM, Anonymous Anonymous said...

Gov. Huckabee's advocacy of the FairTax is the single most important policy position in this election. Research findings explain why:

The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars – $358 billion more than the taxes it replaces [BHKPT].

The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan [THBP].

Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case [THBNP].

The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be [ALM].

Consumption benefits [ALM]:

• Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10.

• Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place.

• The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted.

• By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent.

Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system [KR].

Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively [JK].

Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax [THBPN].

Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20 [THPDB].

On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base [TBJ].

The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent [WM].

ALERT: Kotlikoff refutes Bruce Bartlett's shabby critiques of the FairTax.

At 3:40 PM, Blogger MARK said...

Dont take this page down. Keep it up. It shows how Fairtax is counting on the absurd nonsesnse of making the government pay its own taxes.

Lately, I have exposed this farce, this nonsense, all over the net. And some in the fairtax camp have had to backtrack. They are now saying that while they would tax the federal government, they arent really counting on that money.

Bull crap. This page proves they are counting that money. Government consumption - they are taxing.

And thats a major reason Fairtax is a crock, and the leaders know it.

If you have been fooled by Fairtax, don't get mad at me. Get mad at the con artist that fooled you.

At 12:34 AM, Blogger Jenifer Mary said...

Thanks for figuring out the reports about tax..Everyone should know these type of figure outs so that they can also know about tax and its pro's and con's..But i couldn't see any post after 2005.please keep updating latest information..



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