I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter?
30 percent. This issue is often confusing, so we explain more here. When income tax rates are quoted, economists call that a tax-inclusive quote: I paid 23 percent last year. If that were the case, for $100 one earned, $23 went to Uncle Sam. Or, I had to make $130 to have $100 to spend. Thats a 23-percent tax-inclusive rate. We choose to compare the FairTax to income taxes, quoting the rate the same way, because the FairTax replaces such taxes. That rate is 23 percent inclusive. Sales taxes, on the other hand, are generally quoted tax-exclusive: I bought a $77 shirt and had to pay 30 percent sales tax on the $77, amounting to that same $23, for a total of $100 spent on the shirt. This is a 30-percent sales tax. Or, I spent $100 dollars, $77 for the shirt and $23 in tax. This rate, when programmed into a point-of-purchase terminal, is a 30 percent tax. Note that no matter which way it is quoted, the amount of tax is the same dollar amount ($23) and you maintained the same buying power (
Related Questions
- I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter?
- I own a retail store and hold a UZ-2 certificate. Can I collect the half rate on mail, telephone or similar types of orders?
- Is the 23% inclusive FairTax rate higher or lower when compared to the income taxes people pay today?
