Step by Step Reply
Weeks: I have replied to Mike Parker's' false Fair Tax rhetoric before, so when he tried to rebut my position I had to just laugh. He really has no real concept of the Fair Tax. As I have said before, read the book.
Reply: So the best advice is as always: Read the Book?
Weeks: He also claims "if you are paying 23 percent income tax on $40,000 of income, you will pay $9,200." Wrong again.
Reply: I think Ms. Weeks should explain how that is wrong. My example, which is on this website, is an example of a 23 percent income tax. If you are paying a 23 percent income tax on $40,000, your tax bill is $9,600. No one (in real life) making $40,000 pays a 23 percent rate on the total amount of income. The rate and amount were for the purpose of direct comparison to a before and after situation. It was created to show that an equal 23 percent income tax rate would be less than a 23 percent sales tax for the average family.
Weeks: Secondly, there is a "prebate" for essential goods. The prebate is set at the poverty level, to keep it fair, since many spend all of their paycheck on necessary items. That number is estimated to be about $5,902, which takes the $9,200 figure Mr. Parker quoted down to $3,298, and that's only if the person spends every dime that he makes.
Reply: Ms. Weeks has made the error of comparing apples with oranges. She's using figures from my income tax example and adjusting those with a "prebate" from the FairTax plan. But, she’s too busy contradicting herself to notice. She should use two seperate and equal examples instead of mixing it all up.
Also, consider her point of view that “many spend all of their paycheck on necessary items.” Then contrast that with her statement, “only if the person spends every dime that he makes.”
Well, we’re either spending every dime that we make or we’re not. She is trying to respond to my example of how the FairTax would work for people spending everything they make PLUS borrowing money to buy a new car. She's got the example confused in her head.
I have to agree that the FairTax will change how people live. Just not at all the way the Book and Ms. Weeks says it will.
Now the “prebate” is one of the most important feature to examine.
The Book says gross domestic product (GDP) will increase 10% the first year. That’s a direct function of the “prebate.” Government expenditures are added into GDP. The annual increase in government spending, using Ms. Weeks figure of $5,902, would be $1.7 trillion. That’s the increase of 10 percent in GDP.
Remember, the underlying act, SB 25 does not propose any huge cuts in spending. It does not propose balancing the budget. It uses 23 percent as a tax rate determined before the Republican led Congress authorized the current debt limit of $9 trillion dollars.
If the SB 25 is “revenue neutral,” meaning it doesn’t increase revenue, but it increases spending by $1.7 trillion through a “prebate,” then there is no private market increase in GDP.
Currently, the federal government spends $2.8 trillion dollars. Under the FairTax, it would spend $4.8 trillion. It’s a spending bill, among other things. Government spending would become about a third of all GDP.
The $1.7 trillion increase in spending would be roughly the 10 percent increase in GDP, IF all other factors remained the same.
Debt would rise and inflation would destroy the economy. Good tax plan.
Weeks: I realize both these men will assume that employers will keep all the extra money, but that is where a free market steps in. Once a company offers higher wages, the ripple effect takes place and others will follow. Don't assume employers are "evil." Most want the best for their employees, not the worst, as these two men would have you believe.
Reply: If Ms. Weeks understood business revenue, she would know that business revenue will fall immediately under the FairTax plan. A company with revenue of $100 million annually will have a revenue flow of $77 million annually, going by that Book. Where is this “extra money” that businesses will suddenly have?
Why does Ms. Weeks assume that employers will offer “higher wages” after the FairTax plan goes into place? As for other defective reasoning, why would businesses cut prices when revenues are falling?
Business revenues will fall under the plan by 23 percent. The Book makes that clear. Whatever costs a dollar now, will still cost a dollar. But, the sales tax will be 23 percent of the price.
Businesses that get a price of $1 now, will get 77 cents and give the government 23 cents in the future. Assuming no price increases.
What prevent businesses from increasing prices? No law. If the 23 percent cut in revenue hurts enough, those prices are going up. Market fundamentalism or not.
Weeks: Keep in mind most businesses are small, family-owned companies. They are not all Wal-Mart or Microsoft, so they have a personal relationship with their employees.
Reply: How many bad stories about your boss do you have to share?
