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PaperclipPerfector  7mo ago (text post)   2797 thread views

Small-Scale Question Sunday for September 3, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

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@DuplexFields how does the FairTax proposal work?

Epistemic status: Not DuplexFields.

(I read the Neil Boortz book over a decade ago and briefly looked at the FairTax website just now.)

In a nutshell: If we adopt the FairTax, many taxes are gone, replaced by a 23% sales tax on new products and services. Taxes that no longer exist include income and payroll. As a side effect, the IRS is abolished and the 4 million word tax code is shredded, which warms my directionally-libertarian heart.

Also, everyone gets a monthly prebate (pre-rebate). Everyone gets the same amount. Not sure what the exact figure is, but I'm fairly certain it was 4 digits It's just under $300, thanks Duplex. Basically, that's to keep the tax progressive. A poor family that spends responsibly might end up making money off of taxes due to the prebate. A mega-rich guy throwing a big-ass cocktail party pays taxes on all of it, and gets the exact same monthly prebate.

Another term for the prebate is "Universal Basic Income," now that I think of it.

In a nutshell: If we adopt the FairTax, many taxes are gone, replaced by a 23% sales tax on new products and services.

It's actually defined such that the tax is 23% of the total amount you pay, including tax. So if the total price is $100, $23 goes to the tax and $77 to the seller. It's more like a 30% tax.

One reason it’s calculated that way is to point out income tax is also calculated that way: a tax percent out of an amount instead of a tax on top of an amount.

Yeah. The math is a bit counterintuitive if you're used to thinking about income taxes. For example, a 100% sales tax only creates a tax wedge of 50%, and a sales tax can go over 100%. To create the 95% tax wedge that inspired the song "Taxman," you'd need a 1,900% sales tax.

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