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Archive for June 1st, 2007

Seed Newsvine

FactCheck.org does it again. In their analysis of the Fair Tax proposal they pay close attention to the numbers and the spin placed on those numbers by Huckabee, Tancredo and Hunter. Some of what they have to say is reprinted below:

Americans for Fair Taxation offers the following plain-language interpretation of H.R. 25:

Americans for Fair Taxation: A 23-percent (of the tax-inclusive sales price) sales tax is imposed on all retail sales for personal consumption of new goods and services.

It is the parenthetical that is important, for it hides the real truth of the tax rate.

First consider the way in which sales tax is normally figured. A consumer good that carries a $100 price tag might be subject to a 5 percent sales tax. That means that the final bill for the item is $105. The 5 percent figure is the amount of tax that is charged on the original purchase price. But now suppose that instead of pricing the item at $100, the shop owner simply priced the item at $105, then sent $5 directly to the state. The $105 price would be a tax-inclusive sales price. But $5 is just 4.8 percent of $105. That 4.8 percent number, however, is relatively meaningless. You are still paying exactly the same 5 percent tax on the item.

The 23 percent number in H.R. 25 is the equivalent of the 4.8 percent in the previous example. To calculate the real rate of the sales tax, we have to determine the original purchase price of an item. We can begin with the same $100 item, keeping in mind that a price tag that reads $100 has sales tax already built in. If our tax rate is 23 percent of the tax-inclusive sales price, then of the $100 final price, $23 of those dollars will be for taxes, meaning that the original pre-tax price of the item is $77. To get $23 in taxes on a $77 item, one must impose a 30 percent tax. In other words, a 23 percent sales tax on the tax-inclusive sales price is equivalent to a 30 percent tax on the actual price of the item.

FairTax proponents object to the 30 percent number, claiming that critics use the larger number to frighten people. Americans for Fair Taxation claims that it uses the tax-inclusive number to make it easier to compare the FairTax to the income tax that it will replace (since most of us think of income tax rates on an inclusive basis). But we are not accustomed to thinking of sales taxes inclusively. The result is that many FairTax supporters (about 15 percent of those who wrote to us, for example) do not understand that the 23 percent figure is tax inclusive.

Our analysis of the FairTax used a figure of 34 percent as the basic exclusive tax rate. One e-mailer complained that our number was at least 10 percentage points “higher than [the FairTax] is” because we calculated it as an addition to retail prices. But our 34 percent number is not 10 percentage points higher than the legislation. A 34 percent exclusive number is equivalent to a 25 percent tax inclusive rate – only 2 percentage points higher than the FairTax bill. We think that, intentional or not, the use of the tax-inclusive 23 percent rate has misled a lot of FairTax proponents.

clipped from www.factcheck.org
In our recent article on the second GOP debate, we called out Gov. Mike Huckabee as well as Reps. Tom Tancredo and Duncan Hunter for their support of the FairTax. We wrote that the bipartisan Advisory Panel on Tax Reform had “calculated that a sales tax would have to be set at 34 percent of retail sales prices to bring in the same revenue as the taxes it would replace, meaning that an automobile with a retail price of $10,000 would cost $13,400 including the new sales tax.” A number of readers pointed out that H.R. 25, the specific bill mentioned by Gov. Huckabee, calls for a 23 percent retail sales tax and not the 34 percent used by the Advisory Panel on Tax Reform. That 23 percent number, however, is misleading and based on some extremely optimistic assumptions. We found that while there are several good economic arguments for the FairTax, unless you earn more than $200,000 per year, fairness is not one of them.

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Stand up if you would buy an ointment that would cure cancer, arthritis, warts, athletes foot, headaches, bad breath, and hair loss for the mere sum of $22.95 for a ten day supply! I’ll bet not many folks are standing as they read this.When advertising claims are unbelievable, are designed to scare, or cite facts without citing the appropriate authority one ought to be wary of the claim made. When the advertiser deliberately misleads its intended audience relying on the likelihood that the “facts” of the message will not be checked, rather they will be believed uncritically, that advertiser is no better than a snake oil salesman and ought to be run out of town, tarred and feathered, and otherwise subjected to ridicule and derision.

FactCheck.org exposes this kind of monkey business. I applaud those efforts.

clipped from www.factcheck.org

The U.S. Chamber of Commerce is running a TV ad alleging that “lawsuit abuse” is costing “your family” $3,500 a year. That’s false. The figure is from a study that estimates the cost of all lawsuits, not just abusive ones.

Even the author of the study cited by the chamber says its ad is “misleading.” The fact is his study makes no attempt to specify which lawsuits are legitimate and which can be considered abusive. Furthermore, the study specifically warns against drawing any conclusions about the costs and benefits of the judicial system and even acknowledges that the benefits could outweigh the costs. The chamber ignores this warning. It also fails to note that the same study estimates the cost of all lawsuits at the lowest level in 10 years.

Sutter pointed out that his study “looked at all torts; we don’t segregate between legitimate and illegitimate.”
The chamber ignores the distinction between legitimate suits and abusive ones.

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Not that the Democrats are any better, but FactCheck.org happened to address claims made by the Republican hopefuls during their last debate. I think Lincoln got it right when he remarked that “You can fool all of the people some of the time, and some of the people all of the time, but you can’t fool all of the people all of the time.”

Perhaps we should start holding those that seek political office to a higher standard. Tell the truth. Don’t lie. Don’t cherry pick your facts. Don’t spin. All you do when you do these things is create cynicism, distrust and eventually anger.

clipped from www.factcheck.org
Claims, facts and figures flew at the second GOP presidential debate of 2008. Not all were true. For example:
Mitt Romney claimed he didn’t raise taxes when he was governor of Massachusetts, failing to note that he increased government fees by hundreds of millions of dollars and shifted some of the state tax burden to the local level.
Rep. Tom Tancredo of Colorado claimed scientific reports on whether humans are responsible for global warming are split 50-50, which isn’t close to being true.
Former Arkansas Gov. Mike Huckabee praised a “fair tax” but failed to note that it would ease the burden on the richest Americans while imposing a stiff retail sales tax of perhaps 34 percent.
Former New York Mayor Rudy Giuliani used more statistical dexterity to manipulate statistics, claiming adoptions increased 133 percent when he was mayor. Actually, they peaked and started a continuing decline.

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