Posted on 01/28/2006 1:15:41 PM PST by Eaglewatcher
Supporters of a Legislative package commonly called the FairTax, point out that no other tax reform and replacement idea comes close to providing the economic benefits for American working families and the growth of American Manufacturing like the Fair Tax HR 25/ S25. Major U.S. Manufacturers like Ford Motor and Delphi Corporation are facing difficult challenges and are planning or proposing major changes in order to compete in the global marketplace and to compete within the American marketplace.
Talk Radio has been a buzz on the plan by Ford to cut 30,000 jobs and close several facilities. For months, cities with Delphi Parts plants have be stewing over negotiations and plans that want to cut wages and possibly close facilities. Though part of the solution is to be more efficient and certainly to produce what the customer wants to buy, the other part of the debate is unfair trade practices and unfair labor wages in these competing countries.
Radio Talk Show host Neal Boortz is one talk show host that has discussed the solution for American Manufacturing repeatedly. He has also written a New York Times best selling book, “The FairTax Book” in conjunction with Congressman John Linder of Georgia. The book lays out the problems with our archaic income and payroll tax system and than reviews the benefits of the Legislative Replacement package sponsored by Congressman Linder and based on the 10 years of work and research conducted by Americans for Fair Taxation.
On Television, CNN's Lou Dobbs and Bill O'Reilly show their outrage on how American Manufacturing Jobs are leaving American Shores but provide no comprehensive solutions in their form of “sound bite journalism”. They and many other Americans misunderstand and dismiss the serious grassroots support and supporting research for a solution that will truly help the "little guy" and restore good paying American Jobs. (The Fair Tax HR 25/ S25. www.fairtax.org)
The solution for Ford, Delphi and American Manufacturing in general is not trade barriers or tariffs but is fair trade. But how do you get Fair Trade when competing countries do not pay a Fair Wage. American Workers do not need to compete globally by lowering their wages to such Draconian levels. Fair Tax supporters point out that the solution for better paying American manufacturing jobs at home is to have the lowest taxes on American Manufacturing companies.
American Manufacturing goes where it costs them the least to do business. Even with the higher costs of fuel to ship those goods from overseas, the low wage is what helps some countries compete and it is the Lower business taxes that helps other countries compete.
In Europe, Ireland has had the strongest economic growth and best employment numbers because they have the lowest taxes on business (Corporate tax 12 %). The Solution for America is Lower Taxes on American Manufacturing not Lower Wages on American Workers. The incentive for business to stay in America and not outsource is lower taxes on Corporate earnings with less tax compliance costs.
Ultimately, It is the consumer that pays the business tax in the end on all products and services. Business taxes like business costs for manufacturing are just worked into the price. The Consumer pays the tax not the business.
What if the United States had the lowest Corporate tax in the World? Would not business flock here to manufacture? What if instead of the Bahamas being the Offshore tax haven for business or Corporate headquarters that for Tax purposes those businesses made New York, or California, or Chicago their Corporate home and their preferred place to manufacture from and ship around the World?
There is such a tax plan in Congress waiting in the wings to rev up our Economy, by providing the right incentive for American Manufacturing to stay in America, for Good paying manufacturing jobs not to be outsourced, for American Families to have more take home pay, to make U.S. Soil a Tax free zone for business that can export products around the world Tax-Free. This is how we save American jobs and this is how we compete against substandard wages paid by our global competitors.
The Legislative Package in Congress has been around for several years; it is well researched and has sound economic data to back it up. It is commonly called the FairTax and has over 45 Co-Sponsors in the House and Senate. The bills are HR25 and S25. According to the Fair Tax Scorecard 155 Legislators are leaning in favor. Last Spring 75 Economists sent an open letter to Congress and the President in favor of the Fair Tax. They were joined by Alan Greenspan’s testimony in favor of a consumption tax as a replacement for an Income tax.
From an American worker stand point, the key point is that the Fair Tax helps save American jobs and promotes American Manufacturing that stays on U.S. Soil. It allows American workers to take home an average 30% larger paycheck each and every week by eliminating any federal withholding for income tax or payroll tax from an American workers paycheck. American workers take home 100% of their paycheck!!
American Manufacturers have the incentive to stay in the US and not outsource because they pay no Corporate tax. New American Manufacturing is created because Capital investment in the US is tax-free. Building new plants in the US will cost them less because of lower taxes. The Exports they send overseas pay no tax and are cheaper for sale in the global marketplace. This allows American Manufacturing to compete globally because of lower taxes and not lower wages like Delphi is trying to accomplish.
The Fair Tax is a revenue neutral replacement of the individual and corporate Income tax; payroll tax, capital gains tax, the Alternative Minimum Tax (AMT) and the Death Tax (Estate Tax). It is replaced with a National Sales Tax on retail purchases of all new products and services and supports the funding of the National Budget including Social Security and Medicare.
According to the Legislation, the national sales tax will be included in the price tag you see on a product and will be broken out as a separate line item on your receipt so that Americans know how much they are being taxed and how much they are sending to Uncle Sam with every purchase.
American Families do not have to wait until April 15th to get a refund of their own money. Middle Income Families will take home an average 15% more because of no Income tax withholding and an additional 7.65% because of no payroll tax withholding. Under the Fair Tax, the tax collected replaces the income that funds the national budget and replaces the payroll taxes that fund Social Security and Medicare.
The Fair Tax Legislative package is much more than just a national sales tax it is a package that also has a Prebate (rebate) system that truly untaxes the poor and treats everyone equally and fairly. No forms to keep, no receipts to log in or file. Everyone gets the same prebate check based on family size and valid Social Security cards for each family member.
Maid or Millionaire; the simple way to be sure no one pays a national sales tax on the essentials is not complicated exemptions but to simply send each household a monthly check (debit card) to cover the national sales tax on all spending up to the poverty line for that Family size.
Health and Human Services calculates the poverty line for a married couple with 2 children at $25,660 for the year 2005. The Fair Tax assumes every family of 4 will spend at least that much and sends them a prebate to cover the national sales tax on every dollar up to $25,660. The Inclusive tax rate is 23% or $5,902. The Fair Tax sends each month $492 (5902/12). If that family makes less than $25,660, they still receive the monthly check for $492.
It is a fact, if you make more you spend more. Under the Fair Tax if you spend more you pay more. With the Prebate, the Fair Tax is progressive in that the net tax rate for those American families at the poverty line is a true ZERO; for those at twice the poverty line the net rate is about 11.5%; at 4 times poverty that family is about 17.2%; and the wealthy at 10 times the poverty line and higher, average between a 20 to 23% net federal tax rate.
The Fair Tax truly untaxes the working poor by eliminating the payroll tax of 7.65% and allowing the working poor to take home 100% of their paycheck and receive an additional $5,902/ year to cover the National Sales tax on essentials like clothing, food, housing, or daycare. (Family of 4)
Trillions of Offshore dollars that wealthy individuals and wealthy Corporations hold offshore because of America's current tax laws will return to US shores under the Fair Tax. This capital will find a tax free zone in America and want to invest in American Manufacturing and business that will not only sell to Americans at home but to the entire world. American Exports will not have the 23% national sales tax on them for export. These exportable products will also drop in price because we have removed a major cost element from the supply chain. With no business income or payroll taxes, the cost of those products will go down. With no IRS you reduce the compliance costs dramatically for complying with the IRS rules and regulations. This savings throughout the supply chain will also be reflected in a lower price at home and for export.
It depends on the economist and it depends on the economic model but the estimated price drop on products and services is between 10 and 25% on average. Something you bought for $100 under the income tax will drop to somewhere between $75 and $90 dollars. When you add in the National Sales Tax the final price will be between $97.50 and $117.00. (30% exclusive tax rate equals 23% inclusive or income tax equivalent rate)
Under the Income tax a lower middle income tax family had to earn $129 in order to take home $100. This is based on a 15% income tax withholding and a 7.65% payroll tax withholding.
Under the Fair Tax you take home more money and you have more money to spend even after buying the same items and paying the Fair Tax. You take home $129 and spend $117 with the Fair Tax to buy the same $100 worth of goods you bought with $100 in take home pay under the archaic Income and payroll tax system. You are $12 ahead and on top of that will receive the monthly Prebate check.
Under the Fair Tax Legislative package you lower taxes on business; you give them the incentive to produce and manufacture here within the US and not in China or India, or Mexico.
The way to compete in the 21st Century is not to cut our wages in half. The way to compete in the world is to provide the incentive for business to do business inside the US.
The Fair Tax Legislative package does so much in so many ways. Our American Economy will boom when American manufacturing is growing in the US. The Fair Tax is the best vehicle to do that.
When the Lobbyists and their paid economists come out against it beware. With out the convoluted tax code, Lobbyists, Congressmen, congressional aides and "K" Street will lose a lot of their power and influence. If they come out against it than it must be good for average American families.
Every Politician that came out in support of this idea last election cycle won. This is a winning issue for politicians and when average American people are presented all the facts of the Fair Tax 80 to 90% love it. Get the Facts at www.fairtax.org
If Average American workers can get people like Lou Dobbs and Bill O'Reilly to truly study all the facts that support the Fair Tax, perhaps we can get them to join the over 75 economists that wrote a letter to Congress last Spring in support of the idea. The Fair Tax is the most comprehensive solution to aid American Workers, American Families, American Manufacturing and the American Economy.
"Maybe you would like to explain how GM lost $4.8 billion last quarter if the market price wasn't below their cost."
Maybe you would like to explain how GM is going to stay in business if they continue to lose $4.8 billion per quarter.
"Companies go out of business every day. If they could adjust their prices to cover their cost, how would any company ever go out of business?"
So when companies make a profit, it's just an accident or a coincidence? Isn't it odd that businesses overall on a net basis are profitable and that is the case year end and year out?
"My economic model calls that a tax increase"
Another self proclaimed economist. In the interest of full disclosure, it should be pointed out that none of the SQLs has been willing to debate in public where their economic credentials can be revealed and compared to the professional economists whom they denigrate and insult.
Let's review the post that you made that elicited my response: (Post #50)
"So when companies make a profit, it's just an accident or a coincidence? Isn't it odd that businesses overall on a net basis are profitable and that is the case year end and year out?"
By way of follow-up, isn't it a hell of a coincidence that as crude oil prices have gone up for the past few years, so has the per gallon price at the pump?
Hey! Stop that. No fair showing such obvious connections.
"their domestic problems are a result of poor management decisions over a number of years, not tax policy."
Their domestic problems are a result of much more than poor management decisions over a number of years. The tax code is but only one entity causing them problems. You also have environmental regs that kill innovative designs. You have safety regulations that are not consistent throughout each state. You have emissions regulations unique to each state. You have a big problem with the legal lottery, Ford must reserve $70B a year for lawsuits and on any given DAY they are involved in $300M in litigation. Finally you have legal requirements that give a clear advantage to the labor unions.
Yes, management has a lot of work to do in many areas of the company. But the government has done a lot to tie their hands over the years. Externally to Ford, they need the following actions to happen:
1) NRST.
2) Right to work legislation.
3) Tort reform.
4) Relax enviro regs and commonize emmission standards.
These would go a long way to bringing Ford and GM back to health.
One of my favs is Boortz claim that corporations "don't pay taxes" meaning they pass the cost of taxes on the consumers. Which is why all large corporations spend millions of dollars and great effort in their Tax Departments ... to reduce those taxes.
Boortz compounds his idiocy by telling his followers that if the National Sales Tax is implemented corporations will lower their prices ... since they won't have any income taxes to pay. Yeah, right.
I just dealt with this on another thread. First, unions "right to work" rules are in part doing what "right to work" legislation would do.
Here's the quote from 66. It is not directed at you personally. The explanation is all that I intend to get across.
"Your blind to your own irrationality. You'll grant the employee has the right to quit the job any time. And do that for any reason or no reason. Yet you don't grant the employer has the same right -- to walk away from the employee (fire the employee) at any time. And do that for any reason or no reason.
"Your assert that the employee has greater rights than the employer does. For years the employer put great time and effort into building a profitable business to serve his customers and create jobs in the process. And you claim the Johnny-come-lately employee deserves greater rights than the employer."
I wrote letters to my Congressman John Linder and to Neal Boortz with my concerns about their misrepresentations, and they issued a public clarification. I included my name, address and phone number. This was done in public.
And FreeRepublic is in public.
I think you know that the FairTax popularity is based on a bunch of false promises, and you know that it can't deliver on the promises of the book.
It is easy to get people all riled up with promises of wonderful things but the FairTax can't deliver on the main thrust of the book which is "keep 100% of your paycheck, prices stay the same".
"By way of follow-up, isn't it a hell of a coincidence that as crude oil prices have gone up for the past few years, so has the per gallon price at the pump?"
I used to work in the soft drink industry. The CEO had a long history in that industry. He told the story about how for many years conventional industry wisdom was that soft drinks were a substitute for water and that the American people wouldn't pay very much for them. Soft drink prices had been stuck at 10 cents for years and the bottlers were concerned about volume going down if they raised their prices. Then at some point (in the 60s, if memory serves), there was a crisis in sugar and the price went up. Since sugar was the major component cost-wise in soft drinks at that time, 10 cents no longer covered their costs. They had to raise prices to 25 cents almost overnight. A funny thing happened - volume went down very little. When sugar prices went back down, the bottlers didn't reduce prices immediately and made a killing. Over time, of course, competition restored a normal equilibrium.
Just think - there are thousands of people out there who think that soft drink prices were raised back then because sugar prices went up, and now we learn from YN that the two had nothing to do with each other, that it was a total coincidence.
So when companies make a profit, it's just an accident or a coincidence?Neither. They were able to make their products for less than they could sell them for.
Isn't it odd that businesses overall on a net basis are profitable and that is the case year end and year out?Isn't it odd that so many companies go out of business every year. I guess they should have followed your pricing method and they would have been guaranteed profits!
"How To Insure Your Business Never Loses Money!" by phil_will1
Chapter 1: Add up Your Costs.
Chapter 2: Add Whatever Profit You Want
Chapter 3: Add Whatever Taxes You Think You Might Have to Pay
Chapter 4: Sell Your Product for That Price
Chapter 5: Roll in the Money!
The End
So how many converts have you won to your approach to tax reform over the years?I guess I need to start lying. It's worked for the Fairies.
Maybe you would like to explain how GM is going to stay in business if they continue to lose $4.8 billion per quarter.They won't. That's my point. The price people are willing to pay for their products is below what it cost them to make them.
By "right to work legislation" I am specifically referring to the legislation that would allow me to remain independent of the collective labor contract at any given employer. I wasn't planning on cancelling out the employer/employee right to leave the relationship at any given time.
Sorry about the confusion.
"And FreeRepublic is in public."
An anonymous blog is not in public.
"It is easy to get people all riled up with promises of wonderful things but the FairTax can't deliver on the main thrust of the book which is 'keep 100% of your paycheck, prices stay the same'."
That isn't, and wasn't the main thrust of the book, nor of the proposal. The main thrust of the proposal is that we can have a much simpler and more efficient method of taxation which is more consistent with our constitutional principles and less of a drag on our economy than the current one. I have seen no evidence to indicate that isn't a realistic and reasonable expectation.
My personal main thrust is that we are moving into a totally different economic environment than any that we have known before, globalization is already a huge economic factor and is only going to get bigger, and we can't afford the luxury of a tax system that holds us back in the world marketplace.
And the SQLs are reduced to arguing that costs have nothing to do with prices. I am embarassed for them that they continue to hold onto that ridiculous economic nonsense. Is that your position, also? Do you agree with YN that costs and prices are unrelated? Louie has espoused that bizarre economic notion in the past, also. He may have taken such a battering that he has abandoned it by now, however.
On principle, honest principle should trump union rules and law (see tag line), Employer should have the option of offering non-union employment and employee should have the option to chose. Let free market competition work. Neither union nor legislation should have monopoly-force power.
"So why don't they jack up their prices above the market price? You seem to think that's the solution."
Geez, YN, I thought you were better than this. It is usually a challenge to debate you, but you are lobbing softballs today. You must not be a "morning person". LOL
The answer to your question is obvious. If ALL auto manufacturers were unprofitable, prices would go up. However, since the market is competitive, more efficient producers can offer their product for less and the market won't pay a premium to subsidize inefficient producers. There is a fundamental difference between individual uncompetitive producers and the cost structure of the entire industry. Please see my soft drink story above if you still don't get that.
Why have the prices of electronic consumer products dropped so much in the past few years? Because the Chinese can make them so much cheaper than we can. The reasons have to do with more than just labor costs, but we will leave that alone for later discussion. The point is that their production costs get translated into lower consumer prices. This whole equilibrium is recalibrated each and every day. That is the way that a free market economy works and the global economy is getting freer all the time.
This stuff isn't nearly as difficult as you are making it.
"This stuff isn't nearly as difficult as you are making it."
I am reminded of a recent thread in which an SQL posted something like: "The rising popularity of the FairTax is a testimony to the economic ignorance of the American public."
And then we get into these ridiculous extended debates about whether prices and costs have any relationship.
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