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.
"Hmmm...why didn't they reduce their prices to only make the profit they wanted? It's almost as if they were trying to make as much money as they possibly could without regard for all those taxes they are going to pay. Silly corporation!"
You think that contradicts my position? It doesn't. In fact, I have always said that businesses exist to maximize profit; however profit maximization over the long run is not synonymous with price maximization.
If you will note from my prior post, something similar happened to the soft drink companies in the short run.
Better get your coffee, YN, you aren't on top of your game yet.
The dollars already held are mostly in tax deferred investments like IRA and 401K plans. All of which are dollars that would be taxed under the income tax system.Those dollars would be taxed at a much lower rate than the 23% the FairTax would charge on them. Would it surprise you that the median (average of middle quintile) total effective federal tax rate in 2002 (minus excise taxes - the FairTax doesn't replace those) for Elderly Childless Households was 5.4%. The average was only 14.3% - and that's skewed because of the extremely high income for the top quintile.
You're kidding, right? As a retired Fortune 500 financial executive I have zero interest in reading anything Boortz writes about tax policies. He's convinced me via his radio comments he knows nothing about how corporations work. To give him the benefit of the doubt I'll assume he simply honest and ignorant and not in it for the money he's making by selling books to people even less informed than he.
Off the top of my head, McDonald's and Wal-Mart demonstrate that to be true.
Do you have a study showing what percentage of money people have in after-tax savings, brokerage and investment accounts, ROTH IRAs, and home equity, and forms of cash? as compared with the amount in IRAs and other taxable retirement accounts?
A conservative price drop of 10% means only a net increae of final price with tax of 17% which is certainly offset by the elimination of the income tax on those IRA and 401K investments.
But not for any money where taxes has already been paid-- this money gets hammered under your variant of the Fairtax plan.
Charmed, I'm sure.
And furthermore, I don't think that most retirees pay anywhere close to 17% federal taxes on their withdrawals from retirement accounts.
No.
Why would you feel it is a fair comparison between an entire industry revolving around our tax code and 2 specific entities of another industry?
Because the whole thesis of the thread is that we need to junk the current tax structure to something far more simple in order to bail out Ford and Delphi. (Yes, I expanded Delphi, a former GM sub, to include all of GM in an earlier post. Scratch out GM and write in Delphi if that bothers you - it doesn't change the basic argument).
If you do junk the current tax structure to something far more simple, you risk throwing over a million folks out of work. The point I raised is whether it benefits the economy to throw over a million out of work to save the jobs of a couple of hundred thousand.
Fair taxers may be able to make a logical case. They haven't here.
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.Just curious, why didn't prices come down after costs went down? What happened is the soft drink companies, all working at the same time, were able to change the market. They could have done this without costs going up (it's called collusion and we have a whole division in the DOJ to fight it). When costs went down they were selling into a market that was willing to pay the increase price and the soda companies were more than willing to take the extra money as profit.
however profit maximization over the long run is not synonymous with price maximization.Never said it was.
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.Just to clarify, are you saying corporations don't pass the cost of taxes on to the consumers?
Yes. That isn't a tax issue, however. It is in large part a free trade/fair trade issue. Let's see if I can get all of the zeros in place for our 2005 trade deficit with China.
$185,326,500,000.00
That isn't tax policy at work. That's slave labor. That's manipulated exchange rates. That's an open economy trading with a closed economy. (Source of stats: http://www.census.gov/foreign-trade/balance/c5700.html#2005
Since you all want an economic policy that benefits foreign trade, are you all really saying that you want to impose Communist Chinese economic and tax structures on the US?
Here's the top 10 list for trade deficits for 2005.
China (about equal to 2, 3, and 4 combined)
Japan
Canada
Germany
Mexico
Venezuela
Nigeria
Malaysia
S. Korea
UK
Top surplus appears to be with the Netherlands. So much for superior EU tax policies driving trade.
"They could have done this without costs going up (it's called collusion and we have a whole division in the DOJ to fight it)."
They could have but they didn't, probably because, as you point out, it's illegal. If you have evidence to the contrary, please post it.
The point is that the soft drink companies did exactly what you and your SQL buddies have been saying never happens - they responded to higher production costs with higher prices for their end product.
Again I will say that there is a fundamantal difference between inefficient individual competitiors in a marketplace and a shifting of the cost structure in an industry.
This has been fun, but I have to run. You and Louie and your SQL buddies go on trying to convince people that costs and prices have no relationship because acquiescing on that simple economic principle undermines much of your criticism of the FairTax. You complain about FairTaxers attempts to "marginalize" you when you do a much better job of that than we could ever do.
You didn't answer the question of why prices didn't go down when sugar prices went down.
"Top surplus appears to be with the Netherlands. So much for superior EU tax policies driving trade."
Man, these SQL debate tactics are getting old. You set up a straw man argument which implies that one of two states of nature exist:
1. either tax policies are the only determinant of trade imbalances, or
2. tax policies are not a factor in trade
Then you prove that other factors may be influential and this means that #1 cannot be true; therefore, you have proven #2. The problem is that I never said that tax policies are the ONLY factor contributing to our trade deficit. Any reasonably intelligent person can see your desperation in characterizing my position in such a way and then knocking your own strawman down.
"You didn't answer the question of why prices didn't go down when sugar prices went down."
I don't know that they didn't go down; they just didn't go down immediately. It takes time for competitive forces to work in the marketplace.
Prices are based on what value the market places on items and what competitive options exist. The cost is only relevant to whether the seller makes money, and whether he remains in business. >>>>>>>>>>
The maximum price is set by the market, the minimum that is possible is determined in the long run by costs.
The FairTax may not be perfect, but it is a huge improvement over the current system and significantly better than alternative reform proposals. For many of us, that is good enough to get our support.>>>>>>>>>>>>
I will support it in a heartbeat, I just have some questions about the details and what the practical effects will be. Some have interpreted the bill to mean that there would never be any tax on sales of used items of any kind, even if sold by a business. If this were the actual case I think I would instantly go into the business of buying and selling used furniture or something similiar, I have experience in this sort of thing already. I suspect that in reality sales between individuals would not be taxed but sales by businesses specializing in used items would be taxed.
Let's examine this falacy: Your prototypical family earn $50K per year. According to Tax Stats for the 2003 tax year, filers earning from $30K to $50K paid an average of 6.8% of their gross as income tax. Filers earning from $50K to $75K paid 8.8% of their gross as income tax. Clearly, the prototypical $50K filer paid no more than 7% to 8% of their gross as income tax. Presuming that $50K filer earned all income from wages, they paid another 7.5% in FICA taxes. That brings the total tax burden for the prototypical $50K filer to no more than 15.5%; take home pay is $42,250.
If they bring the entire gross home under the FairTax, they will see a take-home pay increase of 18% ... not the 30% you keep falsely presenting. You again are confusing (perhaps purposefully) marginal tax rate with effective tax rate.
Another fallacy. No one, under the current system, must wait to file to get a refund. All one need do is claim an appropriate number of withholding allowances with their employer to avoid improper withholding.
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