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FAIRtax: Why It's Important That It's 23% Instead of 30%

Updated: Sep 12, 2021

The FAIRtax is a actually 23% - not 30% - using the same standards advocates for the income tax use. Here's why that matters:

Pavel Danilyuk / Pexels

The following article was originally written by Jim Bennett and John Graver and published by Americans For Fair Taxation:

John Graver on the FAIRtax Rate

In “Grassroots Corner” we always ask readers for input, and this time we got some. In our March 22, 2021 issue, we discussed the criticism that the FAIRtax rate is not 23% but actually 30%. John Graver, a successful businessman and author of numerous articles and books on economic issues, weighed in on this issue. Here is what he said: I saw on Grass Roots Corner that you were trying to cut down the time it takes to counter the 23% vs 30% argument. Check this out. It just took me less than three minutes to read it and I could probably improve on that. If you choose to reprint this as an article, please include the following attribution statement: By John Gaver Author of “The Rich Don't Pay Tax! …Or Do They? — Second Edition – Revised and Expanded”

John writes: When calculating the income tax rate, the tax and spend crowd wants to use a methodology that makes the income tax appear less offensive than it really is. That method is called "tax inclusive." But when it comes to the FAIRtax, those same tax and spenders, knowing that the FAIRtax has a tremendous advantage over any form of income tax, desperately wants us to use a calculation methodology that will make the FAIRtax appear less advantageous that it really is. But regardless of how you calculate the tax rates, be it income tax or FAIRtax, the dollar amount collected under each tax regimen doesn’t change. Suppose you go to two auto alarm companies and get them to quote the purchase and installation of the same brand and model of alarms. Company 1 tells you that the alarm will cost $200, plus a 25% installation fee of $50, for a total of $250 installed. (We’ll call this "installation exclusive" - This is analogous to how the tax and spenders want us to use the tax exclusive method, to calculate the FAIRtax). Company 2 tells you that the alarm will cost $250, including a 20% installation fee of (that is also $50). (We’ll call this "installation inclusive" - This is analogous to how the income tax is calculated). It appears that Company 1 is charging less for the alarm, while Company 2 is charging less for the installation. But the total price is exactly the same and the installation charge is $50 in both cases, making the price exactly the same for both. But considering this from a tax viewpoint, the installation fee is analogous to taxes. So, using IRS logic, you are getting a better deal on installation from Company 2, since the installation fee appears to be 5% less than the 25% fee of Company 1. But regardless of how you calculate it, both lead to the same exact $50 installation fee. The tax and spenders realize that if they can get FAIRtax advocates to use a “tax exclusive” calculation method, it will give the false appearance that the FAIRtax is worse than it is, just as the Company 1 installation fee of 25% exclusive “appears” to be higher than the 20% inclusive fee of Company 2. It’s all smoke and mirrors – and so is the 23% vs 30% argument. The FAIRtax uses the same tax inclusive method of calculating the level of tax that the IRS uses, so as to have a true apples-to-apples comparison. I highly recommend ordering John’s book, “The Rich Don't Pay Tax! …Or Do They?" You can get it on Amazon and other places where fine books are sold.

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