Just what in the hell are you talking about with your "$4 on a $100 purchase"?
(Oh, and under the Fair Tax, the drug dealer will only pay 23%, not 30%. Way to go.)
Under the existing system, the drug dealer and the lawyer paid 30% on 90K, if you insist on using this embedded tax crap. That's 15% each, or a total of $30,000 in tax revenues to the gubmint.
But in addition to the 90K taxable filed by the lawyer, the drug dealer made 3.2 mil.......TAX FREE.
Under the fair tax the lawyer still makes his 90K and the drug dealer still makes 3.2 mil but, the lawyer buys a new BMW for 50K and pays $11,500 in taxes. However, the drug dealer (this one just happens to live in West Palm Beach) buys a new yacht that cost $500,000 and has a sales tax of $115,000.
Existing system - 30K in taxes for two people
FairTax system - $126,500 in taxes for the same two people.
Under the fair tax system everybody pays and that's FAIR.
And these embedded taxes are being paid by the person purchasing the good or service-- because if they weren't buying it, then the good wouldn't be made and the service wouldn't be performed, and no taxes would be paid.
The FairTax wants to make this point when talking about retired people who would face huge price increases under the FairTax, but they want to say that it doesn't exist when talkign about the illegal economy.
Under the fair tax the lawyer still makes his 90K and the drug dealer still makes 3.2 mil but, the lawyer buys a new BMW for 50K and pays $11,500 in taxes. However, the drug dealer (this one just happens to live in West Palm Beach) buys a new yacht that cost $500,000 and has a sales tax of $115,000.
According to Boortz, a $10,000 car would still cost $10,000 with the fair tax added and hidden tax removed (interview with Sean Hannity).
What's to prevent the drug dealer from buying his yacht outside the US? Or the lawyer from buying a slightly used BMW; lots of them available around here along with SUVs (a Honda would be more difficult to find).
The drug dealer, through his lawyer, paid over 30% in taxes today. Without the drug dealer, the lawyer would have paid nothing.
I could have just as easily said the drug dealer, through the yacht dealer, paid X percent of $500,000 in embedded taxes today. That "X percent" averages 22%. What we would collect under the Fair Tax is anybody's guess.
My point is that we're collecting tax on the drug dealer today. True, we're not collecting income tax on the drug dealer's $3.2 mil -- but we won't be collecting the Fair Tax when the drug dealer earns that $3.2 mil either.
Unless you're telling me that the drug dealer is going to add the Fair Tax to the price of his drugs, then send that money in to the federal government?
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To make the following example simpler, let's assume the embedded taxes are 23% instead of 22%. Humor me.
Existing system:
Taxes collected from the drug dealer today: $115K (embedded) through his yacht dealer.
Taxes collected from lawyer today: $30K (actually financed by the drug dealer) + $11,500 (embedded) on the BMW (actually financed by the drug dealer).
Income Tax paid by the drug dealer: $0.
Total collected from the drug dealer today: $156,500.
Fair Tax system:
Taxes collected from the drug dealer: $115K through his yacht dealer + $20.7K through his lawyer.
Taxes collected from lawyer: $11,500 on the BMW (actually paid by the drug dealer).
Fair Tax collected by the drug dealer for drugs and sent to the federal government: $0.
Total collected from the drug dealer: $147,200.
We collect less from the drug dealer under the Fair Tax than we do today. Go figure.
But in addition to the 90K taxable filed by the lawyer, the drug dealer made 3.2 mil.......TAX FREE.Except the drug dealers 3.2 mil was from after tax dollars...that wouldn't be the case with the fairtax, it wouldn't be taxed untill he spent it...and don't forget his prebate which lowers his effective tax rate too.
And the fairtax plan would be an incentive for more illegal activity including finace fraud too because it would be a bonanza for money laundering...you know because it's no body's business where your money comes from and you don't have to report it.
If the lawyer buys that BMW today, he pays $11,500 in hidden taxes. Under the Fair Tax he would buy the BMW as a business expense and pay nothing.