Lets say you own the Acme Anvil Company.
The mining company that mines the iron ore has a corporate income tax that they have to pay and they have pay roll taxes for their employees to submit to the Feds. These things don’t just take care of themselves so they have to pay accountants to fill out the forms and submit them to Uncle Sam. The taxes and the cost of compliance (accountant) are expenses associated with the business and will be passed on in the price of their product.
The foundry that smelts the ore into iron also has a corporate income tax return to file and corporate taxes to be paid. They also have pay roll taxes for their employees, W2’s to be mailed, accountants to pay to make sure they comply with the tax code...all passed on to the next link in the food chain.
Eventually the anvil ends up in the hardware store. The store owner has employees of his own to withhold taxes on and a schedule C to file. He most likely has an accountant that he has to pay to make sure he is in compliance with the tax code and guess what? He passes those expenses along to the poor Coyote who is going to try to drop the anvil on the Road Runner.
All those taxes...corporate and withholding...and the costs associated with compliance with the tax code GO AWAY!!! You get 100% of your pay in your pay check...no more withholding!
Will the companies pass those savings along to the consumer? FairTax proponents say “yes” due to competition. The price of goods goes down and then the FairTax is added back bringing the cost back to approximately where it was before the embedded taxes and cost of compliance were done away with.
But what about the poor people?
For this exercise lets assume that it takes $24K/year for a family of 4 to provide for the basic necessities of life...food, cloths, shelter, transportation. It matters not whether you live in a shack or a million dollar home...the basic necessities to sustain life are 24k/year or 2k/month. Anything above that is not a necessity. If the FairTax rate is 24% then that would equal $480/month.
The FairTax would provide a “PRE-bate” to cover the tax on the basic necessities. Each month the Feds would mail a check, make a direct deposit to a checking account or stored value/debit card in the amount equal to the tax that would be expected to be paid on the basic necessities of life. Every household would get this pre-bate. It matters not how much money you bring home. In fact...under the FairTax...it’s none of the gubments bidness how much you bring home...only how many members there are in the household. In the above example...if the household income is only 24k...that family would have NO TAX LIABITY AT ALL...none. Heaven forbid if they bring home 25k that year they would have to pay the FairTax on $1000....or $240 for the year.
If you can afford a yacht and all I can afford is a rowboat...I pay 24% on my rowboat and you pay 24% on your yacht. If all I bring home is 50k and I spend it all...I pay 24% on everything above the determined “necessities of life.” If you bring home 500k and you don’t want to spend it all in order to keep from paying the FairTax and all you spend is 50k...what good is the other 450k if you’re not going to spend it? If I bring home 50k and I don’t want to pay the FairTax...I guess I’ll have to start a savings account. OMG!!!
But none of the above is why I like the FairTax. I like the FairTax because there are no individual income tax forms to fill out. If you aren’t smart enough to fill out the forms yourself and have to pay H&R Block to fill them out for you, under the FairTax you won’t have to do that any more...no more cost of compliance for individuals. No more deadlines to be met by April 15th. No more quarterly payments to be paid. Business decisions would be made according to the needs of the business not the tax implications of the decision. Not to mention the lobbyist that influence government officials to pass laws that give tax breaks to special interest groups. No more tax forms equals no place to hide spending disguised as tax cuts.
Please...buy both books and read them. Educate yourself on the proposal. I think you’ll like it.
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