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    Contrived Fair Tax Fallacies Part 3 #HR25 #S122

    August 21st, 2014 by HR25 Fair Tax Review   |   No Comments

    Possibly the most egregious comment falsely claims that the FairTax will stick a 40-70% tax on everything you buy. This is absurd.
    Firstly, if that were the case, no right-thinking tax reformer (such as myself) would have even given the FairTax a hearing. Someone like me would have dismissed the entire thing as impractical.
    Secondly, a tax that, at its maximum, taxes people at 23% of what they SPEND (not what they earn), cannot cross the threshold to become some behemoth that raises taxes to 40-70%. To arrive at these absurd numbers, one assumes that having the state and local governments pay the FairTax will increase state and local tax burdens without taking into account that states and cities are already paying the extra 22% that Dr. Jorgenson found elevated the prices of everything we currently purchase — and that 22% will go away when the FairTax is enacted, as discussed above. Furthermore, he claims the FairTax rate as an outright 30% when, in fact, it is lower (no matter how you choose to calculate taxes, out of every $100 spent, $23 will go to taxes under the FairTax as presently proposed in Congress).

    This same individual claims the FairTax falls short — short of what, he does not specify — but I will assume he means of falling short of current income tax collections. Calculations from Dr. Lawrence Kotlikoff of Boston University shows that the proposed tax rate should be as proposed in the law ($23 out of every $100 spent). If it is determined that is too low, the law can be changed; and — contrary to the current system — if the tax is raised, it is raised upon everyone based upon how much they choose to spend… there is no favoritism or lobbying possible under the FairTax because there are no exemptions — just the “prebate” — to offset spending on necessities. Additionally, the 1-5% adjustment being claimed is far less than the 10%+ adjustment that would have to be made to his favored 10% Flat Tax.

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