One of the benefits of a presidential election is that even people who don’t stand much of a chance of winning get to make some of their beliefs and policies known. This is the case with Ron Paul. I’m not voting for Ron Paul, but that doesn’t mean that I don’t think he has made some very valid points during his campaign. One of those points (in fairness other candidates also ran on this issue) is about FairTax, which I hadn’t really heard about before now.
After hearing about this tax program, I decided to do some research myself and learn more about how it works. I started by searching online and found the FairTax.org website. It gives a good overview of the program. I then decided to buy the FairTax book on iTunes and give it a listen. After going through the book I looked for people speaking out against FairTax to see what were their complaints. Here is what I learned.
FairTax is the idea of replacing our current tax system (income, capitol gains, estate, etc…) with one tax inclusive sales tax of 23%. Individual tax payers would no longer have to fill out complicated tax forms, and the IRS (at least as we know it) would be shuttered. The key piece of making the tax “fair” is the “prebate” part of it. Every tax paying citizen would be given a monthly prebate check to offset the sales tax up to the poverty level. In other words, if you are a single person, you don’t pay any taxes on the first $10,290 of your spending. The chart below demonstrates how much of a prebate you would receive. But, you will notice it’s not based on income.
The big feature of FairTax is that you don’t pay taxes based on income, but rather on consumption. So in theory, someone who makes $25,000 per year could pay the same as someone who makes $250,000 per year, assuming the higher level earner didn’t spend more than the lesser income person, which is of course highly unlikely. More likely, the person who makes 10x the money would spend a lot more, thus paying a lot more in taxes. Which I have to agree seems fair.
Another important piece of the FairTax idea is that corporations wouldn’t pay taxes. I think that may throw some people off, but keep an open mind as to why that’s not a bad thing. Currently, corporate taxes make up less than 10% of this country’s tax income. This is because corporations have figured out many ways around taxes. Also, from a tax payer perspective, the U.S. is one of the worst countries in the world to have a company. That’s why major corporations like Stanley Tools, Tyco and Dhamler/Chrysler have moved offshore in recent years, taking with them many jobs. By eliminating taxes from corporations, we see little difference in the overall taxes collected, but the U.S. becomes a tax haven for businesses, bringing more of them and their jobs to the U.S. According to both the proponents and opponents of FairTax, this will have a major impact on our economy. It’s estimated that the average American would end up making about 10% more income.
Let me list out a few benefits that I found, and then list a few objections so that people can form their own opinions.
The Benefits of FairTax
No more IRS! Let’s face it, the IRS are bullies and we are all a little afraid of them, no matter how much attention we pay to our taxes. The amount of paperwork involved in taxes is mind blowing, and the amount of fear we have of screwing it up borders on paranoia. Obviously, those who live in states that have state income tax would still have paperwork, but I’m guessing if FairTax was to become law, you would likely see the states move in that direction as well.
Helps lower illegal immigration, and taxes those who are here. A big issue in this election has been illegal immigration. When you think about why we care, three issues come up; they take jobs (but so do legal immigrants), it poses a national security issue, and they don’t pay taxes. FairTax directly fixes the last of these concerns, and has an indirect impact on the other two. Illegal immigrants will be paying federal taxes every time they eat out, go to a grocery store, buy a CD, etc… This is obviously applicable to everyone living off under-the-table wages. Add to that the fact that illegal immigrants will not be eligible for prebates, and this country becomes a lot less attractive. Take away the financial incentive, and you have a lot fewer people crossing into our borders, which makes stopping the remaining people much easier.
Closes tax loopholes. Another big issue in this election is closing tax loopholes. It’s very easy for people to set up offshore corporations through the Internet, and funnel cash through those accounts. And, it’s also nearly impossible for the government to crack down on these activities. FairTax eliminates the benefits of these types of loopholes. Since there is no capital gains or other taxes to drive these people to seek financial refuges offshore, they won’t do it. Since people are taxed when they spend the money, they will just keep their money here, thereby bringing 100’s of billions of dollars back to American banks where they belong, and these people will have no choice but to pay taxes.
Lower costs. Since corporations no longer pay taxes, the cost of good should go down significantly. Of course, corporations always try to pocket as much as they can as profit, but competition drives the market place. So prices will go down.
More higher paying jobs. As I mentioned above, the U.S. essentially becomes a tax haven for corporations, so you will not only see American companies return to the U.S., but a whole set of foreign companies would likely move their operations here, bringing with them millions of high-paying new jobs.
Less political maneuvering from politicians. How many times have we heard political candidates tout their ideas about taxes, only to be left feeling a little screwed. A certain speech about “Read my lips, no new taxes” comes to mind. I doubt anyone understands, or has even read, the 60,000+ page tax code. There are tax breaks being given in so many different ways, it’s impossible to understand it. Another big issue in this election has been to eliminate (or at least greatly reduce) lobbyists from our political process. Well, guess what many of those lobbyists are lobbying for. FairTax would get rid of a lot of lobbyists and give politicians less control over manipulating our taxes.
Arguments against FairTax
Some of these are valid, but many are just from people who haven’t read the FairTax plan, which by the way is 130 pages vs. 60,000+ pages of our current tax code.
This adds a sales tax, so we pay more money.
This isn’t true. We do get a sales tax, but we no longer have an income tax, nor do we have withholdings for social security and medicare. Also, each American receives thousands of dollars in prebates to offset the sales tax up to poverty level. This means that a single person with no kids pays no taxes on the first $10,290 of spending.
The fair tax is really 30%, not 23%.
This is kinda true, and it’s something I don’t like about the way proponents state the plan. It’s a little complicated, so I’ll try to illustrate it here. Let’s say you buy an iPod for $100. The store will get $77 of that money, and $23 will go to the government under FairTax. The tax is included in the sales price, so the consumer sees a tax of 23%. But, the store may look at it as they are having to mark this item up 29% to get their $77 off this product. To be honest, I agree that the 23% number is misleading. But, I also agree that prices should go down at least 20% for most items since neither the store nor the manufacturer (or shipping company, or anyone else) is paying any taxes. I honestly believe if FairTax is passed, we would be seeing at least a 12% dip in prices for goods and services. So even if you add 30% to these prices, it’s still pretty good.
FairTax was created by a Scientologist.
This one is just goofy. A guy named Bartlet first declared this when he accused Fred Thompson of “channeling L. Ron Hubbard” for his tax plan. It’s not true. The big connection Bartlet has here is that one of the people (someone who is not a Scientologist or has even been one) involved early on with FairTax had a conversation with two people, who later became Scientologists, about a national sales tax. I cannot find anything from Scientologists taking credit for FairTax. They don’t like the IRS because the IRS doesn’t want to recognize their religion. While the rest of us don’t like the IRS for normal reasons.
FairTax is a Republican tax plan.
This is not really true, but has some veracity to it. FairTax is a non-partisan tax plan, but it does appear that a lot more Republicans support it than Democrats. But you have to keep in mind that Democrats often run for office based on taxing big corporations, so you shouldn’t look for wide support until more people know how the plan works. FairTax doesn’t sound-bite well.
FairTax will hurt charities.
This argument does have some logic behind it. The idea is that people give to charity so they can get tax deductions. The truth is that most people don’t line item charity items off their taxes. And since you’re giving the money away, and not really spending it, those dollars are pre-taxed just like your deductions are now. But there is no doubt that big companies often do give money to charity to offset their taxes, and now they wouldn’t have an incentive to do that. I also wondered if non-profits would have to pay taxes under FairTax. I did some checking and found that they would no longer have to pay payroll taxes, which they do currently, and they would be treated like a company when they buy goods for the charity, so they wouldn’t have to pay the sales tax.
The cost of transitioning would be too much for retailers.
This is a pretty silly argument. Retailers have electronic cash registers that are always being altered to fit for different taxes. On top of that, retailers would be compensated for having to make the update. Also, retailers would be able to sell their existing inventory in a way to not incur additional taxes. There would be no real costs of transition to retailers.
FairTax would hurt the lower and middle class.
This is completely untrue. Here’s an example; let’s say you have a waitress who makes $20,000 per year. Let’s say she is paying taxes on about 15% of her income. That would be $3,000. She is taxed on that money even if she saves it, or whatever. Under FairTax, she would receive her whole check, plus she would not be taxed on the first $10,210. So, that leaves a remaining $9,790. She is only taxed on the amount she spends. So lets say she spent most of that money, $6,000. She would be charged $1,380 in taxes. That lowers her taxes to less than half as before. Let’s say she spent just about everything she made, $19,000. She would be taxed $2,005.60. About 2/3 of her current tax bill. Try these calculations on your income. Just look at your check and remember to add everything that was withheld. Then add in your prebate and see how much you would spend to see how much you would be taxed.
Education would go up 30%.
This is 100% untrue. Education does not get the sales tax applied. On top of that, schools no longer pay taxes, so education will in fact go down in price.
Government would pay taxes to itself.
This is true. Under FairTax, the government would indeed pay taxes. I don’t like this idea for one main reason, it gives an artificial boost to the FairTax numbers. Having the government pay money to itself doesn’t create new income. This is something I think they should fix in the FairTax plan before it gets approved.
All my current post-tax savings would be taxed again.
This could be true. If you are one of the smart few who have stashed away some cash over the years, your saving could again be taxed. The only way I can see around this is to pre-pay bills before FairTax went into effect and then re-save the money. For example, if you have $20k saved, and are making payments on a car, pay off the car and stash the future payments away in the bank, and they become untaxed until you use them. Or, pre-pay your mortgage.
FairTax would hurt 401K or IRAs.
This is untrue. 401K and IRA’s were never tax exempt, they are tax deferment plans. So you were always going to pay taxes on that money. The only difference is that you will now only pay when you spend that money. Another thought about retirees and FairTax is that they will not have to pay capitol gains tax on their homes if they sell them. In other words, if a retiree sells his/her house and moves into something smaller, and wants to keep the difference in cash, they now wouldn’t pay capitol gains on that money, which is huge. And of course, they wouldn’t have to invest in silly things to help lower their estate tax for family members before death, since that tax would no longer exist.
FairTax taxes the Internet.
This is untrue. What is true is that you would now pay a tax for your ISP service, and you would pay taxes on all new goods and services purchased online. So, for example, you would pay taxes on new books purchased through Amazon, but not used books bought on eBay. But keep in mind that Amazon, UPS, and the other companies that are part of this transaction would no longer be paying taxes, so look for those prices to be lower.
I decided to research FairTax because I thought it was an interesting idea, but of course I was suspicious of the downside, admittedly in part because it’s roots lie in Republican soil. But I reminded myself that I’m financially conservative and that economics is not a place where one party has a clear edge above the other.
What I found after my research is that FairTax is a plan that is not perfect, but way better than the current form of federal taxation. The simplicity is one of the key selling points. Bringing the tax code down from 60,000 pages to 130 pages means that for once we could all familiarize ourselves with the tax code. It would likely become a High School requirement that students read the entire tax code and pass a simple test. Imagine a country where our president could recite the entire tax code, and where the IRS is no longer feared by individuals.
One thing that did surprise me was the amount of pure animosity the plan evokes in some. I guess like all change, fear and anger are normal initial reactions. But what I find offensive is the amount of false statements being issued about this plan. I’m not asking you to take my word for anything, you can read the entire FairTax plan here. But certainly don’t take anyone else at their word on this either.
A friend who is currently attending SOU brought up the FairTax during a break in her U.S. History class. She was surprised at how many people were unaware of estate tax and other details about our current tax system. But her professor had some strong feelings about FairTax and interjected his ignorance by first claiming that a gift tax wouldn’t be applicable unless it was over $750k. He was adamant about this fact because he had spoken to an accountant. Well, as you can see here, he is wrong. The gift tax starts at $12k. Even more freighting is that he felt the need to correct my friend on her citing of the 16th amendment, claiming that it was the 17th amendment that covered income tax, and that there was a limit on income taxation. Once again, wrong and wrong. It is in fact the 16th amendment, and there is no limit on what the government can take out. It’s safe to assume that the limit is set just below the amount that would cause Americans to take up arms against our leaders. If you think about the fact that a professor of U.S. History doesn’t even know his amendments, that’s scary enough, but then add to this his claim that he likes our current tax structure because he writes everything off. How about you, do you like the IRS?
This is a good example of ignorance being the loudest voice in the room. Ignorance is an easy fix, read up and make your own decisions.
One note about my research. I found this site when doing research on FairTax. You can see that the author doesn’t support the plan. He bashes is all the way through the article. But note the “update” on the bottom where the author admits that he was operating under the assumption that only individuals below the poverty line would receive the prebate. He notes the update, but he doesn’t think that the fact that every American receives thousands of dollars from the government each year is worth re-working his biased article. More troubling is the level of his miscomprehension of the plan to start with, because if he had understood the plan he would have known there is no way for the government to know a person’s income level . . . there are no filings. This is another loud voice of ignorance in the way of getting things done. The world would be a much better place if the ignorant cracked a book.
I will conclude by saying that the word “change” has been tossed around a lot during the current election. Being a supporter of Barack Obama (who by the way doesn’t support FairTax, so shoot him a letter if you do), I take change to mean a few things. A better, more diplomatic foreign policy. An end to bi-partisan bickering that stops progress. An end to lobbyists having more input in this country than its citizens. But I would also like to see a big change in our economy and the ways Americans are taxed. Please read the plan for yourself and make a decision. And please leave your thoughts here for others to learn and debate.
[…] Coldheartedtruth wrote an interesting post today on a quick excerpt FairTax – What you should know One of the benefits of a presidential election is that even people who don’t stand much of a chance of winning get to make some of their beliefs and policies known. This is the case with Ron Paul. I’m not voting for Ron Paul, but that doesn’t mean that I don’t think he has made some very Read the full post from One Blog Too Many – Ed Shull’s Blog Tags: Politics via Blogdigger blog search for real work at home jobs. […]
You have NO CLUE about the fairtax.
You read pure propaganda, a snake oil salesman sold you a case of riverwater, and you are suddenly an expert on taxes.
You had NO intellecutal curiousity about who will get the new tax burden.
Good insight into fair tax? The book was a good explanation?
YOu should be pissed at the folks who conned you with this nonsense. My guess is, you will be pissed a me.
Did they tell you the rest of the story? Or just the stuff they were told? By snake oil salesman?
What if – you woke up one morning in your nursing home, which you could barely afford, and got a tax bill of 2000 a month. Not a bill for staying at the nursing home – a tax bill for 2000?
What if you woke up one morning and your rent went up 400 dollars, your utilities went up 300 collars, and the surgery you needed that day went up 30,000 dollars?
What if – you woke up one morning and someone sent you a prebate check for 200 dollars to pay the above sales taxes of 30,700?
What if you could add. And think what would you say about the brilliant tax plan that did such a thing?
What if your child had leukemia, and you were spending 400,000 dollars to keep them alive? And you got a tax bill sales tax of 100,000 dollars?
See, my misled friends, Fairtax taxes rent. It doesnt care if you struggle to pay your rent, it will go up 23%.
Fiartax taxes surgery and all medicaal care. It doesnt care if you struggle to pay that, or even if you have insurance.
Fairtax pretends its going to get 460 billion from people who get expensive health care, by its tax on health care.
Fair tax pretends its going to get 100 billion from people who rent, by its tax on rent.
Fairtax pretends its going to get 300 billion from the government by magically taxing the federal government.
Fairtax pretends its going to get 200 billion from people who buy new houses.
Here is a clue — they can’t tax the federal government. Thats like paying yourself 10,000 a day to cut your own grass.
Here is another clue — they can’t tax health care. Cancer victims and others would scream bloody murder, and many CAN”T pay it.
Here is another clue — they can’t tax rent, 40 million people will have a cow.
Here is another clue — they CAN’T tax new homes – people will just avoid buying new homes that are heavily taxed.
Fairtax is a farce, a shall game. You got took, you got fooled.
Now, go be mad at them. Not me/
Mark – Thanks for demonstrating how loud the voice of ignorance can be. I’m doubtful you read my blog post. If you did, you would say that I am very aware that rent, medical expenses, and all new goods and products are taxed. But we are taxed now. Just for fun I’ll tackle one section of your rant.
Paying taxes on my rent is not much different than paying taxes on my income. If my rent is $1,000.00 per month, than I would be paying $1,300 per month. But it’s not like I’m not being taxed on the $1,000.00 per month now, I’m just being taxed when I make the money.
Then you have the fact that when companies are not taxed, the costs of goods and services come down. And more companies in the U.S. means more jobs and higher income.
There are parts of the FairTax plan I don’t like, and Mark has hit on one of them; taxing the federal government does not really create new tax dollars.
I encourage people to read the plan themselves so they can make their own decisions. Don’t let people like Mark make you think it’s just a complicated way to screw the common folk. It’s 130 pages vs. 60,000 pages of todays tax code. There isn’t much room in there to hide anything.
Going over Mark’s comments again, I have to say that Mark seems like a real moron. Where the hell is he getting his numbers? $2k per month on taxes for a nursing home? Just a perfect example of who fights FairTax.
[…] FairTax – What you should know […]
So…what if I saved 500K for retirement by the time I’m 65 which is coming in 5 years…so say the government implemnets this “FairTax” -I’m screwed …
What if I want to go on a cruise or buy a new lazyboy or do stuff that I have always wanted to do…I have to pay tax twice. Once when I earned the cash and now again when I spend. The tax is unfair – please explain how I am wrong…
Ron – I agree that the tax would have a potentially negative effect on people who have saved money. But realize that you still get your prebates, so assuming that you’re on a fixed income, you’re not going to be taxed on the first $10,210 of what you spend. And if you have saved that much, I imagine that capitol gains tax is a nightmare. That would be gone.
Also, many people who retire sell their homes to buy smaller places. With FairTax they would not have to pay capitol gains tax on that either.
And the last point here is that when you pass on, you’re kids will not have to deal with a death tax of any sorts.
And keep in mind that FairTax wouldn’t kick in overnight. You could plan around this. For example, if you knew FairTax was kicking in on January 2009, then you could spend more now, pre-pay bills, pay off your car or house, etc…, just pay in advance for everything for the next couple years. Then you would have no bill in 2009, and you could save the cash back. How I doubt it would take care of the full $500k, it could certainly do away with a chunk of it.
One other thought; if a chunk of this is in an IRA or 401k, you will be taxed on that anyway under the current tax laws. So this would have a negligible effect.
So I get what you’re saying Ron. This isn’t the perfect solution, but I think it’s step in the right direction.
Interesting response but I’ll have to strongly disagree. Look, why should I pay twice? Why should I be forced to pre-pay for anything? To change the rules mid-stream on people like me is not fair. The only way I would accept this unfair tax is if they exempted whatever income is in my bank account at the time of switch over. I fear this tax may go through and change my life forever. I’m sure people like myself will flee the United States for countries with favorable tax codes. This is unfortunate because I love this country.
The money I have is not in an IRA or 401K and I own my house free and clear. You make some good points, but under this system I would lose my freedom to spend my hard earned money as fast or slow as I choose. Changing the rules is not fair to people with nest eggs period. This is a huge flaw in your tax proposal which kills the perceived benefits you mention. It’s easy for younger people without much of a nest egg to support this proposal but there is a huge baby boomer population to think about who are beginning to retire.
Fix what I mention above and I’ll support the tax. Unfortunately, the President and Congress only do what is in their interest to be elected and will most likely not fix what I mention…look at the economic stimulus package – I was screwed here too.
Ron – You have made some valid points that I think would be worth flushing out. I do think that with the advanced notice you would receive, and some smart planning, you could minimize the impact of the tax.
The theory is that since the FairTax is revenue-neutral, the price you pay for goods/services should stay the same.
Yes, the sales tax you pay for the item(s) will increase, but the underlying cost of the item should decrease by an equivalent amount. So it will actually cost you the same out-of-pocket.
There is also the added bonus of the feeling that “I am deliberately choosing to fund my Federal Government in this manner” rather than being forced to fill out a form every April 15th. And that, to me, is worth plenty.
Randy – Excellent input to add, thank you.
Top of the evening to you Ed.
You asked me to read your post on the Fair Tax and I have to say that you did your research and wrote a very informative post.
The fair tax as it is written does sound very anticing. However, Fair Tax, Flat Tax, Value Added Tax, what ever name you want to put on it is nothing more than a smokescreen to keep the American People busy promoting their own destruction; It is called the herding technique.
They are just that, distractions and the wrong discussion. So few people read or reasearch enough to know that prior to 1913 we didn’t have an income tax to feed the central banking system known as the (FED).
I am going to put a link here for you to read,(and for anybody to read as far as that goes) and I think you will agree that we are heading in the wrong direction. I have done a lot of reading and research in this area for about 5 or 6 years now but it is hard to get people out of their daily routines to wake up and realize that the working men and women of this country are drowning in political bureaucratic destruction.
The same inept members of Congress who were fired in the phony ‘Republican Revolution’ in 1994 for not getting the job done are still here in 2008, i.e., Pelosi, Rangel, Waxman, Harman, Abercrombie, Conyers, Biden, Kennedy, Schumer, Feinstein, Boxer, Rockefeller, Levin and Sarbanes. With the exception of 26 seats, the same Republicans who didn’t get the job done for the past 12 years and have destroyed the Bill of Rights, are still here in 2008.
And people expect the same corrupt, inept bureaucrats to “change America” for the better? Not one of those poltroons has upheld their oath of office since they were sworn in and the same applies to every Republican still in Congress with the exception of a few like Ron Paul who Michael Medved thinks is a crook, crank, lunatic and loser. Of course, since tens of millions of Americans have no idea what our legal form of government is, what constitutes constitutional vs unconstitutional, it’s no wonder they think their party is doing a great job and it’s the other party that’s evil. That’s how propaganda works: sell the same poison under a different label.
I challenge anyone to raise your hand if you believe this Democrat or Republican controlled Congress ,which ever it turns out to be,with either Obama or McCain will nullify the National ID act, NAFTA, GATT, CAFTA, the Patriot Act, the John Warner Defense Authorization Act, get America out of the UN, abolish the unnecessary Department of Homeland Security, stop ALL foreign aid, stop the withholding scam, abolish the unconstitutional EPA and Federal Department of Education, immediately stop funding the unconstitutional and immoral invasions of Afghanistan and Iraq, pull our troops out of all these foreign countries, tell the American people about the voluntary nature of social security, Medicare, hold serious hearings on 911 and get to the truth, stop the destruction of our agricultural industry, overturn and nullify CODEX and get rid of all these unconstitutional laws regarding supplements and health treatments to enrich the pharmaceutical industry, nullify the agreement to give ILLEGAL aliens social security benefits, eliminate the unnecessary federal income tax, abolish the privately owned “Federal” Reserve and return to a true, constitutional monetary policy, pass legislation to forbid the selling off of American companies to foreign governments and interests and eliminate a full one half of all the unconstitutional cabinets and spending bankrupting this nation. NOT ON YOUR LIFE!!!!!
As soon as this election is over, whoever is elected is going to go to Washington and for 4 years at least, will forget you and I even exist. Dont believe me, think back a few weeks ago when the big bailout was being voted on. How many in Washington listened to the millions of Americans screaming for them not to bail out the crooks on Wall Street.
We are on the brink of losing all that was given to us by rivers of blood and sacrifice. We must all put aside political affiliations and make the commitment to put aside our personal lives and “fun” to devote ourselves entirely to the solutions and remedies available or we are going to find ourselves governed by international law, penniless with rags on our backs while bureaucratic renegades continue their quest for totalitarian government. Despite the utter stupidity of people like Michael Medved, millions of us know the truth and it will only be we the people who stop the collapse.
@Charles Powell Thanks for the great comment. I do agree with you that congress has been inept at managing the financial crisis. Both sides of the aisle have handled things terribly, and I don’t see that changing anytime soon.
I further agree that Ron Paul has showed an exceptional amount of foresight into the economic issues of this country. I don’t think either party likes what he is saying, but they are unable to come with an intelligent argument against it.
The same can be said about FairTax. Ron Paul and Mike Gravel both support this, but I don’t think politicians like what it stands for. I read over the link you posted, and it looks like a of the points are the same that the FairTax advocates preach. The fact that income taxes are unconstitutional, and the fact that federal withholding is one of the biggest tricks perpetrated on the American people.
Taxation is part of life, and despite what Sarah Palin believes, it is patriotic to pay taxes. But I would like more control over my taxes. It makes sense that if I save more, I should pay less taxes. It makes sense to if I spend a bunch of money, I would pay more taxes than someone who didn’t. It makes sense that people who spend less than $15k per year can’t afford to pay federal taxes. And it makes sense that if a corporation has a choice to relocate to a country with no taxes, they will bring millions of jobs with them.
I can’t find anyone that has a valid point against this. I see your point above, but I don’t think it’s likely that we will eliminate taxes.
I would love to hear from anyone who has a strong, valid point against FairTax.
Regarding Government paying taxes –
Mark Curran Says:”Here is a clue — they can’t tax the federal government. Thats like paying yourself 10,000 a day to cut your own grass.”
Ed Says: “There are parts of the FairTax plan I don’t like, and Mark has hit on one of them; taxing the federal government does not really create new tax dollars.”
I own a small business and periodically sell to the government. Today, my customer’s price (including the government) includes all the taxes I pay.
So, in that respect, the government pays embedded taxes to me that are in turn sent to them via my tax payment. These embedded taxes are added into all products sold.
That’s one of the reasons the government loves our current tax system. Very few people actually know how much taxes they are paying.
Politicians can say they are sticking it to big bad greedy corporations, but they just pass it on. I suspect there are cost accountants at Wal-Mart that can tell you the exact amount of taxes embedded in their price for a gallon of milk.
You pay that embedded tax today whether you have income or not.
@Mike C – Thanks for the great point. I can see your point. I would love to see the FairTax advocates start pushing some info out from real cost accountants so the American people can get an idea of what types of taxes we are already paying at the register.
Thanks for the great comment.
[…] can understand the governments desire to regulate corporations through taxation, I love the idea of FairTax and think it should implemented […]