This is an excellent dissertation about the % of taxes paid with the FairTax - and yes, there really are embedded taxes. The following article comes from Tom Wright with the AFFT org.:
I just did my taxes, and after all of my deductions and exemptions, I only paid 14% of my income in taxes. Why is the FairTax a good deal for me?
We get this question all of the time…and it is a good one. Sadly, it is also proof of the problem with our tax code today. The problem is that you believe that you are only paying 14% in taxes…and you have forgotten about the payroll taxes that you pay and the corporate income taxes built into the price of everything that you buy.
Remember, the FairTax is revenue neutral, which means that it is not a tax cut. The FairTax expects that as Americans we will pay just as much in taxes tomorrow as we do today. The only differences will be that (a) we’ll know how much we are paying because it will be visible and (b) we’ll free the economy from the constraints of the income tax so that a rising economic tide can lift all boats.
Let’s imagine that you earn $100,000 (the round number, while high, will make the math easier)…and imagine that after all of your deductions, exemptions and credits, your income tax bill was $14,000, or 14% of your total income.
Now, remember that you also must pay 7.65% for payroll taxes, which is another $7,650. Also, remember that your employer must pay another 7.65% of your salary in payroll taxes (or, if you’re self-employed, you must pay this amount directly). That is another $7,650. Adding these amounts together, you will have paid $15,300 in payroll taxes.
Suddenly, even though you thought that you were only paying $14,000, or 14%, we now see that you’re paying $29,300, or 29%, and we haven’t even calculated the hidden taxes in the price of everything that you buy. This is why the FairTax is a better deal for you.
Today, taxes are hidden so you don’t really know how much you’re paying. Plus, today, for every dollar handed out to someone in a special tax break, tax credit, or tax exemption, the tax bill of everyone else must rise by that dollar. The FairTax will eliminate all of these special preferences, and when those who today receive those preferences start to pay more, you can begin to pay less.
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7 comments:
The Fair Tax may be revenue neutral for the Nation but it certainly would not be neutral for me - it would cost me big time.
I am on disability (both private and SSDI). I paid for my private disability insurance premiums with after-tax money while i still worrked, so my private disability benefits (about $36,000 annually) are income tax free. And, I'm in Texas so there is no state income tax.
If the Fair Tax were implemented today with no provision for people in my situation, we would end up in the hole because we'd be effectively taxed 23% on the money which today is not taxed at all.
Anybody have any words of wisdom for people inmy situation with regard to the Fair Tax?
Mike,
Well, one thing you could do is move to Mexico? Because, despite all the happy BS from Tom Wright, you are indeed going to be hurt financially should the Fairtax become law.
From paying no taxes today, you will pay an estimated $7000+ in sales taxes depending on how much used stuff you buy...Remember, there are no used services, no used groceries, no used rental housing, no used restaurant meals, nothing used at Wal-Mart, etc. etc. And it's worse than that because the most likely scenario is that prices will rise 17% under the Fairtax. Your purchasing power will be down more than 30% even after including the prebate.
As a practical matter you need to flesh out some details of your situation and bring your question to the attention of Boortz for his upcoming "webinar". It would be interesting to see how he responds to your situation.
FairTax on 'private insurance' is paid upon initial purchase of the policy. There is no tax on insurance premiums because the tax is paid once and only once under the FairTax. If you were to be hospitalized, no tax there either and up to your designated maximum allowed. No tax for the outpatient visit to your physician. However, you will pay FairTax % on your copay visit. For example, my copay visit is $20 per visit plus 23%. Does this help any?
I'm not a proponent of the FairTax, but Section 206 of the bill handles this. You will get a credit equal to the FairTax you would pay when your disability payment was spent. Most likely it would be your insurer who would file for this credit and then increase your payment accordingly.
Mike, are you forgetting about the prebate? Under FairTax, you'll be receiving a rebate for the first $30,000 you spend per year.
Also, you might think that you aren't paying taxes today, but actually you are. 22% of the price of everything your purchase today is embedded taxes... all removed with FairTax (and replaced with a 23% tax). So something that costs you $100 today would cost you ((100 x 0.78) x 1.3) $101.40 under FairTax.
Why can't we all just keep ourselves healthy to begin with? It starts at home and you can start with your own children, NOW!
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