I sent this tonight to Linder and Boortz.
I do think, however...that the economic boom that would result WOULD increase purchasing power...
The "Fair Tax" stuff will kill us small businesses who provide services. I am sure my clients will love to pay %20-30 taxes on what ever I produce.
To keep things at the same rate, I must drop my rate. I seriously doubt any business which will drop their rates just because "taxes" are not there.
I don't think Linder or Boortz will get it. They will still be convinced that employee taxes are not 'embedded taxes'. But it will be interesting how they respond.
Aren't "embedded taxes" going to vary greatly depending on product?
I don't think you fully understand the concept "embedded taxes".
Bob's Bakery will no longer have to pay either the employer portion or the employee portion of payroll taxes. The employee taxes, which are withheld from George's wages, are not an expense to Bob anyway. Bob pays George the same amount of money whether he withholds taxes or doesn't. George pays the tax, not Bob.
You forget that Bob the Baker pays income tax on his profit from sales. Businessess pay no taxes under the Fairtax. That is his main source of savings that he would be able to pass on to his customers. If Bob is feeling greedy and doesn't lower his prices, competiton from Jack's Bakery, who has the same tax savings and has lowered his prices, will force Bob to do the same or go out of business. That is unless Bob has really great cinnamon rolls.
I just got finished reading "Flat Tax Revolution" by Steve Forbes. I have to say after reading that book I'm convinced more than ever that the Flat Tax is the way to go.
I still want to read the FairTax book to get a balanced perspective, but I'm a bit worried that the FairTax as I understand it may compel purchasers to buy used products whenever possible -- much like those who bought used cars and boats when the luxury tax was enacted -- and really hurt the new construction market.
The tax on services will mean that many things will get even more expensive, like college education. Moreover, even things the U.S. Government buys, like office supplies and fighter jets will have that extra overhead attached.
If you can find a copy (I got mine at my local Costco) I highly recommend reading "Flat Tax Revolution".
The fact that former Soviet satellite countries are implementing it and watching their productivity go through the roof seems to indicate that this is the way we should seriously consider.
I suspect wages would have to drop 25% also for all the "changes" to occur. What about the min. wage? Who'll drop it?
The price of bread will be what the market can bear. If the baker can sell for $1.23, he will do it. OTOH, the competition factor will not be changed by the tax.
sorry I left you off the earlier ping. you might be interested in this.
FYI. The IRS frowns on that practice with "extreme prejudice". There is no faster way to get a room in the Iron Bar Hotel.
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
I'm not sure I follow your interpretation of embedded taxes in regard to what Boortz and Linder discuss in their book.
Embedded taxes refer to those taxes which are spent for components or products bought by the retailer (for instance, if I'm a baker, when I buy sugar for my cookies, I have to pay a sales tax on that sugar, plus the sugar's embedded taxes from the sugar refinery, which must buy the sugar from the cane producers, who must buy it from the cane farmers, who must buy land for their farms... etc etc.) All of those individual taxes add up and divide out, so that a little bit of the cost of paying all those taxes ends up in the sugar that I buy for my famous sugar cookies. Under the FairTax, however, embedded taxes (all those taxes added up from buying the sugar from the distributor who buys it from the refinery which buys it from the farmers which rents the land from the landowners) would be removed, thus lowering the cost by, ON AVERAGE, 22%. That number would obviously change depending on the goods in question, because not all goods go through the same amount of production, and not all goods are taxed the same. The basic idea is that, regardless of actual reduction, prices would go down by, on average, the same amount as the FairTax itself, meaning that all produced goods would AVERAGE OUT at about the same amount, on top of the elimination of federal income taxes, SS taxes and Medicaid.
Unless I've totally missed your point.
If we ever get a "Fair Tax", I'm going to invest all of my money in gambling equipment, alcohol, narcotics and small loan operationg.
I saw Boortz on C-SPAN the other day and he was explaining how everybody would get a government check on the first of each month to reimburse them for the sales taxes that they would pay.
In his example be mentioned something like $400 per month for a family of four.
Oh, yes indeed. That all that we need. Hundreds of millions of people getting a government check on the first of every month. Any guesses as to what they will spend it on? Any? And how fast they will spend it?
Within six months there will be stores everywhere loaning them money against their next government check. Or next years'.
This would seem like a really good deal for expatriates who who receive a retirement income from investments in the US but live abroad.
The single most ridiculous arguement I've read to date opposing the Fair Tax idea.
I'll make this very simple: Business already pay 100% of the wage out every payroll in the pay the employee gets and the withheld taxes to the government. PLUS they have to pay their matching FICA along with state and federal unemployement taxes so they are paying MORE than 100%. Then you add in benefit withholdings to insurance companies, financial instutions for things like 401(k), etc.
What "embedded taxes" are you talking about here? These same business are also required monthly to pay in any tax collections (sales taxes, "sin" taxes, etc) from the previous month.
What a business needs to lower the selling price is lower costs. Since this plan would eliminate corporate income taxes and the matching of FICA taxes then business will now have money they are currently paying to the government out of their profits.