The gross misrepresentation continues. That number, which the fairtaxers paid for, includes taxes paid by employees, according to Dr. Jorgenson who did the study for them. In fact those taxes paid by employees, represent the majority of the 22% embedded taxes that the study found. Taxes paid by corporation and their share of the payroll tax only adds about 7% to the cost of the product. It is all smoke and mirrors. Those embedded taxes can not come out of the product unless employees agree to take a cut in pay, which ain't gonna happen. Price go up significantly under the fairtax after the 30% sales tax is added on the price.
You'll note, also, that the 'fair' taxers will be able to perform (and doubtless will perform) another bit of sleight-of-hand when it comes to wage contracts that are tied to CPI. Not to mention also purchasing contracts that are tied to one or another industry index.
If ever there were a more powerful inflation accelerant than the 'fair' tax (barring of course price controls), I'm unable to name it.
Why would employees take a cut in pay ? An employee now, whether they realize it or not, is “paying” 15.2% in FICA taxes off their wages. That’s 7.6% they can see, and another 7.2% they don’t. Employees, by definition, will become 15.2% less expensive to the employer without changing the employee’s take home pay in the slightest. Then add back the % taken out for federal taxes, and the employee will actually get an increase.
>>”Those embedded taxes can not come out of the product unless employees agree to take a cut in pay, which ain’t gonna happen. Price go up significantly under the fairtax after the 30% sales tax is added on the price.”<<
Well, if the employees’ wages DON’T go down, that means that their take-home pay will RISE significantly, say by 25-35% depending upon the amount of withholding and SS taxes now being taken out. This will give them the added funds to pay the Fair Tax.
Realistically, though, wages will drift lower over time until an equilibrium is reached at lower levels of both wages and prices (pre-fair-tax) because of competition from imports, which will otherwise be lower even after the fair-tax is applied to them. So, logically, wages WILL adjust and the embedded tax WILL eventually come out of prices. In other words, your assessment is probably incorrect and you should consider re-thinking it, assuming you’re serious about trying to figure it out.
To me, the most complex problem the fair tax will face is how to deal with people buying goods through a business and then transferring them to personal consumption without paying the tax, i.e., the black market problem. It won’t be anywhere near the 100% suggested by one poster, but it could be significant unless a way is found around the problem.
I wonder if just labeling all sales of certain products as taxable because they’re consumption items and then allowing businesses a credit for all sales tax paid in the month has been considered? Anyone know? That wouldn’t completely solve the problem, but it would go a long way, I think.
By the way, I’m only now getting into thinking about this, but I’m pretty sure Huckabee is going to be our next president, so I figure I’d better start paying attention. How come none of the rest of the “conservative” Republican candidates have a plan to take on the IRS? Or at least a flat tax proposal? If they do, they’re sure not very proud of it, as I haven’t heard anyone but Huckabee talk taxes. Shows leadership, doesn’t it....
When are you going to stop with that same lie? We have all practically memorized it by now, and it has ceased to be even the slightest bit funny.
How about doing us a favor -- if you insist on lying to us, try to conjure up a new one for us to laugh at?
Your employer pays you; but he pays isn't what you get. When the guy in the job interview offers you, say, $50K, he's calculating that hiring you will cost at least $60K -- with FICA matching, benefits, and providing you with a desk and a computer. Eliminate payroll taxes altogether, and everyone who's following the rules gets a raise. If you made $50K last year, and kept $30K, and next year you could make $45K and keep $45K, is that really a pay cut?
Price go up significantly under the fairtax after the 30% sales tax is added on the price.
Yes. Retail prices will go up. I support the Fair Tax, but I'm annoyed by some of the pie-in-the-sky projections about how incomes will go up prices will come down, and the government will get revenue handed to them by elves and faeries.
The bottom line, to use the index used by The Economist, is this: How many hours do you have to work to buy a Big Mac? Under the fair tax, a Big Mac would cost more. And you'd make more per hour, if only because you're keeping what used to be FICA tax and income tax withholding.
When I was in high school, I was gassing up my '69 Dodge Dart at $0.75 a gallon. I was making eight bucks an hour. Now, I'm paying just shy of four times as much for gas, but I'm making ... let's just say considerably more than eight bucks an hour. In my daily life, in the amount of my time it costs me, gasoline has actually gotten less expensive over the last couple decades.
I would expect the end result of adopting the Fair Tax to be a wash. It's true that economics isn't a zero-sum game, but it's also true that you can't get something for nothing. TANSTAAFL.
Where you do get more savings and better efficiency is cutting the head off of the IRS. You save most of the cost of that bureaucracy (most, not all; there will still have to be a government agency to monitor tax compliance.) You get rid of the hours every American is forced to spend shuffling papers around before April 15. You put H&R Block out of business, and send those accountants and lawyers to work figuring out how to make money rather than how to hide it.
I do not expect the Fair Tax to significantly reduce the cost of taxes -- that would require spending cuts. But I do expect it to reduce the hassle, the intrusiveness, and the arbitrary power of the federal government. I expect it to build an economy that encourages thrift and saving, rather than rewarding spending and debt. I expect it to get the camel's nose out of my bank accounts.
After that, we get to work cutting budgets to bring the rate down.