An alternative proposal for a federal consumption tax claims that their tax rate would be much lower than with Sensible Tax Reform. How could they be so different?
That proposal, the so-called fair tax, employs a non-conventional calculation for a sales tax. All other sales taxes in the world (whether conventional state sales taxes or the very common value-added tax that most countries in the world employ) are calculated as the rate that will be added to the sales price. The fair tax proponents do not do that. Instead, they calculate what percentage of the total cost (price plus tax) is tax. The amount of the tax is the same in either case, but the method of calculating its percentage impact varies. For example, if you buy a $1 candy bar, you would pay a 30% tax of $0.30 for a total cost of $1.30. The fair tax calculation uses the same numbers but calculates the tax rate differently: Since the total cost of the candy bar will be $1.30 of which $0.30 is tax, they point out that the tax represents 23% of the total cost (i.e., $0.30 / $1.30 = 0.23 or 23%). So their use of the 23% is mathematically correct. However, since their way is not how sales t
That proposal, the so-called fair tax, employs a non-conventional calculation for a sales tax. All other sales taxes in the world (whether conventional state sales taxes or the very common value-added tax that most countries in the world employ) are calculated as the rate that will be added to the sales price. The fair tax proponents do not do that. Instead, they calculate what percentage of the total cost (price plus tax) is tax. The amount of the tax is the same in either case, but the method of calculating its percentage impact varies. For example, if you buy a $1 candy bar, you would pay a 30% tax of $0.30 for a total cost of $1.30. The fair tax calculation uses the same numbers but calculates the tax rate differently: Since the total cost of the candy bar will be $1.30 of which $0.30 is tax, they point out that the tax represents 23% of the total cost (i.e., $0.30 / $1.30 = 0.23 or 23%). So their use of the 23% is mathematically correct. However, since their way is not how sales t
