How will nursing home patients pay 12-20 thousand EXTRA a year, just in TAXES?

And remember — according to the lulnatic Fairtax plan, even the government pays this tax, on anything it pays for — including health care. Because ALL — repeat — ALL health care is taxed under Farce Tax, er, I mean Fairtax. There ARE no exemptions, at all, for ANYONE getting ANY health care.

So the government will have to pay itself a huge tax on all the medical cost it pays for — soldiers coming back from war need surgery and care — government would have to pay the llunatic fairtax.

Please pass this farce, please.

… both Gale and Kotlikoff et al. include estimates of state and local government consumption in their tax bases. Following the provisions of H.R. 25, this is calculated indirectly as (1) total current consumption expenditures on purchases of inputs including labor, materials and services, net of capital consumption allowances (which are included in the NIPA as state and local government consumption expenditures), plus (2) investment spending, following the same prepayment approach used in the case of housing investment, less (3) the portion of state and local government spending that represents purchases of inputs into education, which is treated as investment in human capital rather than consumption.

Although Gale and Kotlikoff et al. both follow this general approach, Kotlikoff et al. subtract only the labor costs of education, while Gale subtracts all state and local costs of providing education, including nonlabor costs and capital spending. For education costs, H.R. 25 specifies that tuition costs are fully deductible, but costs for room and board, sports activities, recreational activities, hobbies, games, and arts or crafts or cultural activities are not deductible. (It is unclear whether there would be an attempt to determine the portion, if any, of tuition payments that finance such nondeductible activities.) Determining the appropriate fraction of total state and local education expenditures that correspond to the nondeductible items would be exceedingly difficult. Accordingly, to err on the side of a conservative estimate of the tax rate required to achieve real revenue neutrality, we follow Gale in subtracting all state and local expenditures attributable to education, effectively assuming that the fraction of expenditures that goes to the nondeductible items is relatively small; this reduces the sales base by $302.3 billion. The net result is that the total state and local government consumption component of the tax base is $754.6 C = billion.

I’m not sure it matters who is right or wrong here with inclusion / exclusion of these figures but it is a large amount in the base. If you add this back in and take out the tax credits, you’re at about a 26.5% rate (36% exclusive). So this state and local exclusion is a bit over 1%, which represents almost 1/3 of the state / local expenditure. Now, I believe this 1% exists in either case – it’s just a matter of who collects the tax. If the state/local expense is not included in the tax base, than the FairTax rate is higher. If it is included in the tax base, than the FairTax rate is lower but state and local taxes are higher.

BHI states that purchasing power is transferred to state and local taxpayers from state and local governments. To recapture the lost revenue, state and local governments would have to raise taxes in order to continue collecting the same real revenues from their taxpayers. If the state / local pays the tax on the 300 billion, than they state will have to raise a similar percentage to maintain real revenue. If the state doesn’t pay taxes on this 300 billion of consumption, the FairTax rate must be higher to collect more revenue from the rest of the tax base. So it’s one or the other, but we’re still going to pay it. D&Z put the remaining tax base on the state and local government at 2.8%. I’m not sure where these things will fall out, but my point was that in the Gale and D&Z study, they’ve excluded some of the state and local base (right or wrong), which changes where the tax is reflected (fed or state/local).

Probably the largest assumption that affected the rate on the Gale and Z&D study was in regard to state and local spending. Gale and Z&D excluded a good deal of state and local spending (300 billion), which results in an increase to the FairTax rate rather than an increase in the state and local tax rates. BHI left much of this for state and local governments to adjust their tax policy or spending policy as needed to accommodate paying the FairTax. This could be stated as deceptive as it hides part of the rate in a state and local tax increase, or this could be argued that it removes the current deception and reveals the true cost of local government services (relative to private industry providing the same services). So with the BHI study, we would see a larger impact on state and local policy, and less so with Gale and Z&D who include this in the FairTax rate. This does have an effect on measurements of tax burden – as state and local governments may choose any number of ways to generate the revenue by being more or less progressive than the FairTax (or even adopting the FairTax model).

To Hayden’s point though, the studies did not account for avoidance and evasion. I think we would have to cut back on spending if we use a 23% rate. I don’t expect this would break many hearts on this blog though.

Imho, you just add fuel to the Boortz fire when you use a study that “isn’t the fairtax.” Yes they don’t consider evasion nor do they consider economic growth. Don’t any of the other independent studies more closely resemble what the fairtax represents?

As you know, I’m not too hung up on the rate because I believe it is what we are all effectively paying today. Can you point to which studies in the research list you think are really representative?