If the FairTax is really as good as Huckabee/FairTax organization say why can I not verify the 2006 paper #s?

Question

“Beacon Hill Institute and Dr. Kotlikoff estimate the FairTax base for 2007 to be $11.244 trillion.” www.FairTax.org I just now read the 2006 paper analyzing HR-25 and using some 2006 GDP reports. The BEA website does not keep older estimates, and the December 2007 estimate does not match the paper. The tables that the professor cites, i.e. 5.4.5B and 2.4.5 to name a few, are not in the December 2007 report. Is it not risky to base one's analysis and policy on a single information source and not check individual figures against alternative sources in industry or the government or against more recent information? The paper actually using economic data from 2006 analyzes the 2005 Act intended to be inacted in 2007. Because we are in 2007 and the 2007 Act is designed to be implemented in 2009 at the 23% rate, the economic assumptions may have shifted, which may account for my differing calculations and apparent shortfall in revenue.

The United States Bureau of Economic Analysis reported a $13.194 trillion Gross Domestic Product (GDP) in 2006 and estimates closer to $14 trillion in their December 2007 report. Unfortunately, the FairTax base is consumer spending with exclusions and government spending. Overall, consumer spending in that same report is about $9.2 trillion, and in the Department of Labor report in February 2007 that reports 2005 spending, it is only $6.9 trillion. If you take a more conservative approach of deriving the tax base estimate from the actual state sales taxes collected and tax rates as reported by the Census Bureau (some inaccuracies for states without sales taxes), the 2006 figure is about $4 trillion. To this you can add new home sales (728,000 per month x 12 months x $220,000 national average house sales price) of $1.9 trillion and new car sales ($28,451 average new car sales price x 16.5 million cars according to NADA) of $0.47 trillion because used homes and cars are not taxed.

Adding $2.7 trillion in government consumption at all levels, the actual fair tax base appears to be closer $9.1 trillion rather than the $11.2 trillion in their literature. The exclusion of used cars and homes, corporate taxes, and taxes on capital gains costs us possible tax revenue to meet our federal budget needs.
The gross 23% FairTax Revenue appears to be around $2.1 trillion, which is already a third less than the roughly $2.8-$2.9 trillion in federal expenditures. If you take the poverty level reimbursement (23% x $18,000 X 135 million tax returns in 2007), we could be drop our available revenue by another $0.6 trillion, which means that we would have an even greater deficit than we already have, leading to more inflation.
On a personal tax basis, you may be dropping out FICA and Medicare with added higher effective tax rates through sales tax, but adding to deficit and inflation. Will retailers really drop their prices by 15-20% as soon as the new tax code goes live?

Answer 1

The FairTax is basically taxes that are taken from purchases of goods, not from your paycheck. In reality, consumers make a lot more money with the FairTax because they can get their full paycheck, and if you pay any taxes on the goods that you purchase, you get some of it back at the end of the month (I would believe this would synonymous with tax returns). Anyways, it does sound good for us because we make more money, but many worry that it will lower the government's revenue and there will not be as much money available to pay for public amenities and other things like that.

Answer 2

The Fair Tax is still a better plan than what we have currently. It is a usage tax. I believe those states that currently do not have taxes, in order to particpate, will have to change their status.
The figures you are quoting may be correct, and you have done a lot of research. However, while past comparisons of the data may not be on the Fair Tax website, they have been studying this for at least 10 years.
I agree that they should have published the data for more than just one year, but at least we have some comparison. There are several other factors that will be the cause of the data not matching. Such as consumer spending and how the economy is doing.

Answer 3

Yes the Fair-Tax is better then what we have---your mention of shortfall may well be wrong because inflation would cause more receipt of the Tax then less.---In reality we need neither the Fair-Tax or the Income Tax. What is really needed is less spending and downsizing of government in general and a return to Constitutional Government.