The Fair Tax Act, S122/HR25, proposes a tax on all new merchandise and services in place of the income taxes, payroll taxes, corporation taxes, and taxes on dividends. Critics of the act, whom propose a 23 percent inclusive tax, have confused the issue by saying that this law is in reality a 30 percent tax. The following explanation will clear any misinformation.
The 23-percent tax is included in the stated price of each item or service. For a $100 item, $23 of it is taxes with the remaining $77 paying for the item. Following this logic, stating you are in the 25 percent tax bracket, $25 is taxes and the item is $75. Now, the magic with percentages of numbers comes into play. For the Fair Tax proposal, if one divides $23 by $77, the resulting answer is a 30-percent tax. The income tax rate by this same method is $25 divided by $75 resulting in a 33 percent tax. Adding in the other taxes, $7.65 payroll and Social Security, one pays $32.65 in taxes and $67.35 for the item, which is really a 48.5-percent tax. Therefore, the 30-percent Fair Tax rate is better than the present methodology.
Please contact Congressman Jim Gerlach at http://gerlach.house.gov/, Sen. Pat Toomey at http://www.toomey.senate.gov/, and Sen. Bob Casey at http://www.casey.senate.gov/, telling them you want Fair Tax.
DR. WALTER WESLEY SNYDER V