Fair Tax Solution for Ford, Delphi & American Manufacturing

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.

You are making up your own definitions of Marginal Rate and Effective Rate. Neither has anything to do with overpayments or refunds on April 15th. And, in any event, there is no reason (other than laziness, perhaps) that forces you overpay or underpay your withholding.

Most Americans have a 15% tax rate deducted from their salary based onthe marginal rate tables for payroll.

You use the example of a $50K family of four. Such a family DOES NOT have 15% income tax withheld. If you believe they do, you are seriously misinformed about the income tax system. (That might explain your misguided belief in the FairTax.)

And you also forgot to add in the 7.65% payroll tax.

I most certainly did NOT:

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% ... not the 30% you keep falsely presenting

... after you do the take home pay calcualtion you ten need to add in the prebate ...

So far, I have only corrected your assertions about the INCOME tax situation. There is no prebate under the Income Tax system. Before we can properly consider a valid comparison between the two systems, we have to correct your incorrect assertions about the current system ... assertions you keep repeating despite evidence they are incorrect.

$36.13B/$371B=9.74% - Nothing out of hand here.....

A net profit margin of 9.74% seems pretty high for a commodity product like gasoline and it's 60% higher than the profit margin they made in 1997. But that's irrelevant. What's is relevant is that their costs went up 25% and their profits went up 44%. So what's the relationship between their costs and the price they paid? If they had some gasoline stockpiled that they produced in 1997, or if God magically gave them 20 billion gallons, what price do you think they would have charged for it? The same market price they got for the stuff they produced in 2005.

I should also have warned you that personal insults are the SQLSquad's stock in trade.

You might also ask about:

- how does it eliminate withholding taxes (I realize you did, I'm just throwing in a superfluous redundancy for Nightie to bitch about).

- how does it fund S/S & M/C.

- how does it offer border-adjustability of taxation.

- how does it retrieve additional tax revenue from the illegal econony.

- how does it keep from warping right back into the same sort of exception-ridden, favor-buying system that we now have.

- how does it simplify all aspects of tax reporting so that the taxpayer has no (as in zero) obligation to the taxing authority in submitting data to them or being hammered by them.

- how does it offer the taxpayer the precept of being innocent until proven guilty unlike the present system or any income based system.

- how does it lower prices.

- how does it lower consumption costs to the level of the FairTax.

- how does it eliminate the unfunded mandates in reporting to taxing authorities as does the FairTax.

Nightie'll probably call you some unfavorable things, but just consider that an honor. Maybe you can throw some of these things (and others) into later posts.

"So, let me see now if I have this straight ... the FairTax supporters may not use the economic data which is presented in good detail on the Americans For Fair Taxation website (because you say so) while you are quite free to use all of the snippets you can gather up from the known SQL defenders (who seldom, if ever, admit to being so - just like you) even if they are only op/ed pieces with little or no economic detail? By George, I think I’ve got it!!! "

Nice summary of SQL opinions on the matter of economic support. Check out my tag line for an appropriate response.

I disagree Dimples - Respectfully.

Though Jorgensen has either changed or fine tuned his 22 to 25% drop to include a wage or salary drop. Others at least at Fair Tax including Dr. Walby have not.

The American Farm Bureau Federation supports the efforts of the Fair Tax as well.

A conservative 10% price drop does not mean a wage drop in take home pay. it does means the employer saves the 7.65% employer paid payroll tax and it does mean the employee keeps tohe 7.65% payroll tax normally dedcuted form his gross pay.

So, $129 is the new gross that come home versus the $100 in take home pay under the old system.

And a 10% drop takes those $100 woth of product down to $90 and add in the Fair tax they now pay $117.

THey are $12 dollars ahead(per $100 in take home pay under the income and payroll tax) and we haven't accounted for the Prebate yet!!!!!

Think about it, if you could eliminate 7.65% payroll tax paid by the employer(not part of gross salary) and eliminate the coroporate income tax; and eliminate 80 to 90% of the economically wasted 250 to 400 billion in compliance costs. Plus pump in to the economy increaed investment and growth because of the more efficient tax system. The result is booming economic growth and job creation.

Now multiply the savings
throughout the supply chain from producer of seed and fertilizer to the farmer to the grain mill to the baker to the grocery store.

Most of these people paid business income taxes and payroll tax; most paid accountants and tax attorneys to keep them compliant with the code. inefficient busineess decisions were made because of the tax code. etc. etc,.

10% price drop is conservative and reasonable expectation just to most businessmen let alone economists.

Public will expect it when the Fair Tax is passed and will punish those companies and sellers that do not lower prices. This will be a driving force to get the 10% savings.

The idea that a wage drop is required for a 10% price drop in the supply chain is false.

Are you really and truly (in front of God and all the other FairTax supporters who have suffered your "stuff" over months and months) really going to sit there and claim that you did not push the VAT, Nightie???? For shame.

I didn't push a VAT. I have stated that I would prefer a VAT over the FairTax and I have answered questions (corrected Fairie's lies, more like) about the VAT. That's not "pushing" the VAT.

And you are the most shameless person on Free Republic. I can only imagine how the rest of the Fairies cringe every time you post.

Offering employee discounts from auto makers to the public has nothing to do with the Fairtax plan...nice try though.
But on average across the board of typical purchases by families the average price drop could easily be 10%- IMHO.
I'm not interested in your opinion, humble or otherwise. You aren't writing for a phoney blog here. You aren't going to get away with lying about "economic models" or anything else.

I want to see you post your:

"updated and conservative economic model of a 10% price drop"

Or was that a lie?

Your across the board price drop would have to include imports. If we're going to toss around opinions, it's my opinion that at least half of what we purchase is imported and has no bearing on our tax laws. If half of our purchases are imported then the other half would have to support your across the board "price drop". ...Here we are again with the phoney unsupported 20% "price drop".

Others at least at Fair Tax including Dr. Walby have not.

Have you asked her? I bet she base her opinions on a misunderstanding/misrepresentation of Jorgenson's work. Why don't we compose an email and ask her what she thinks would be the price/wage response to the FairTax.

The American Farm Bureau Federation supports the efforts of the Fair Tax as well.

And the National Retail Federation and the National Association of Retailers don't. So what?

Look at this Senior couple living solely on Social Security.

Your mileage may vary. Let's try that again:

Now let's suppose you're a retired single filer living off of a combination of Social Security income and a small Private Pension (no savings to speak of.) You earn the same $25,944 as the AFFT example; you pay NO income Tax, you pay NO FICA tax. Prices are inflated 5% because of embedded taxes removed by the FairTax. Net spending power is $24,644.

Under the FairTax, that same retiree gets a $2.2K prebate for a total spendable income of $28,144, 23% of which is used to pay FairTax. That leaves net spending power at $21,671: a NET DECREASE of 12%.

Even if I allow the ENTIRE 10% price reduction you claim, but will not happen, the single retire is still over 7% behind!

And, until the retiree starts paying over about 10% effective income tax, the bigger his pension, the "behinder" he gets!

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