It sounds simple enough, all taxes are rolled into the retail/consumer cost which includes both labor and materials. I still have to see how they will handle the cost of doing business like buying new equpment and machinery. Without those write offs no one is going to be buying anything new and will hold on to the old stuff as long as they can.
I still have to see how they will handle the cost of doing business like buying new equpment and machinery.
Business purchases are not taxed under the NRST, nor do business pay income or payroll taxes. All income is exempt from taxation. What is there to deduct from?
Without those write offs no one is going to be buying anything new and will hold on to the old stuff as long as they can.
In otherwords you are suggesting business will not produce, sell or make a profit without an income tax to make them do it????
"I still have to see how they will handle the cost of doing business like buying new equpment and machinery. Without those write offs no one is going to be buying anything new and will hold on to the old stuff as long as they can."
It's a paradigm shift. The purpose of any tax write-off is so that you can pay for a particular expenditure with pre-tax money. With the FairTax, you pay for everything with pre-tax money. There may be some psychological incentive to spend for the tax deduction now, but with businesses having more money because of the removal of corporate income and payroll taxes, there will be an offset there. In addition, remember that because of the removal of imbedded taxes and the resultant price decline US produced goods purchased as business inputs will cost less than they do now - by about 20% or so.
Therefore, we would have a new business environment in which:
(1) Demand for US produced goods is significantly higher than it is now, which creates an strong incentive for busimess investments
(2) The cost of US produced business inputs is lower than it is now, and
(3) cash flows of businesses will have improved because of not having to pay corporate income and payroll taxes. Much of that cash flow, of course, will be used to lower prices in response to competition.
When you balance all that out, I think that it is reasonable to assume that there are plenty of factors which would, at the very least, offset the loss of the tax deduction for business capital acquisitions.
The same situation would hold true for charitable deductions and homes. Even though the FairTax does not provide specific tax breaks, the environment for those types of expenditures would be extremely healthy.