I know that is a tall order, but one that is more than past due. The more the American people are exposed to ACORN, the SEIU, the Apollo Alliance, Health Care Reform, Cap and Trade, the unsustainable spending going on in our Capitol, how they may all be tied together, the corruption, and potential corruption within each, the more their eyes are opened. What better time than now to support a bold idea that will cut the heart from the rot that infests Washington today. The Fair Tax is such a Bold Idea.
I felt this would be a good place to insert a quote on corruption by by Thomas Jefferson, John Adams, or Benjamin Franklin, but then I came across The following quote by John F. Kennedy:
"Communism has never come to power in a country that was not disrupted by war or corruption, or both".How prophetic is that? So there you go, a fair and balanced approach through using the quote of a Democrat. But back to the point; ending corruption, or at least cutting off the life blood that feeds corruption. First, one has to ask what feeds corruption in Washington? Power? Money? Both? My answer would be Power over Money.
Today our government has the power to tax one individual at the expense of another or to relieve the tax burden of one group at the expense of another. Our government should not possess such power over the people. Is it not the responsibility of government to treat all citizens the same? How is it that the government can wield such power? I would suggest that it is through the Federal Tax Code. The Federal Income Tax Code gives our government power over the people it should not possess.
I am not advocating that the people of our country pay no taxes, only that we all pay our fair share through the Fair Tax. I hear talk all the time of a Flat Tax, but that simply will not do. The Tax Reform Act of 1986 was in essence an attempt to consolidate some 15 levels of tax into 4, or a Flat-er Tax. However, the Tax Reform Act of 1986 has been amended literally thousands of times. Why you might ask? Because special interest groups influence politicians to reward their groups through the Tax Code. Not all of these changes are malicious, but they can all lead to corruption. It is a simple fact that each and every one enable politicians to curry favor through the expense of tax payers like you and I.
A Flat Tax keeps politicians in charge of the tax code and therefore your income. The Fair Tax puts people in charge by eliminating special interest groups influence on politicians and politicians ability to change the tax code.
I have written about the Fair Tax many times, so check out what I've already written. I encourage everyone to go to www.fairtax.org read about the Fair Tax and educate yourself on how the Fair Tax works. Simply said, through eliminating the 16th amendment, the Fair Tax does away with all Federal income withholding taxes. (Social Security Withholding, Medicare, And Federal Withholding). For individuals and Corporations alike and replaces those taxes with a 23% national sales tax on all new products.
Ray,
ReplyDeleteI did go back and read your August Fairtax blog. Well written, but your major claims are just not accurate. You are promoting the "free lunch" myth that even Boortz and Linder now disavow. There is no way we can get 100% of our pay/pension, and prices would remain the same. Here's why.
In 1998, Dr Dale Jorgenson published a study, paid for by AFFT, which concluded that the income tax related costs were 22% on average across 35 industry segments, (not 23% as you wrote). But Jorgenson subsequently confirmed that he assumed that employee gross pay would be reduced to the current net after withholding, and that those employee dollars would be used to reduce business costs (payroll). This isn't going to happen for fairness and contractual reasons. Can you imagine the Union's reactions? So, if we are all going to get all of our pay, how much can business actually reduce their costs?
Using the 2007 data in the Kotlikoff/BHI study about what Fairtax rate would work, with retail sales of $9.5 trillion, businesses paid $291 billion in income taxes or 3% of sales; businesses paid $435 billion in FICA or 4.5% of sales; and businesses paid $265 billion in compliance costs or 2.5% of sales. Add them up and, if you agree that businesses can't save more than they paid in tax related costs, then businesses might reduce costs by 10%. Add the 30% sales tax to their costs and retail prices will rise by 17%. (1.00 x .9 x 1.30 = 1.17). Simple math. And, please note that retail merchants have to add 30%, not 23%, to their costs in order to arrive at a 23% inclusive price.
You also seem to believe that those cost savings cascade or accumulate up through the production chain. While the dollar savings do cascade, the cost percentage of sales does not. It doesn't matter if there is one level of production or ten, the percentage cost savings remains the same. That is true because the cost savings apply only to the value added at each level of production.
The bottom line is that we will probably get all our gross pay/pensions, retail prices will rise by 17% or so, but our increased take home pay plus the prebate should offset the higher prices. That's not true for everyone, and may create economic hardships for retirees who currently pay no income or payroll taxes, and to a lesser degree, working poor who pay no net tax due to the EITC offsetting the payroll contribution.
There is no free lunch, Ray, and you need to tell it like it is!