People are already taxed on medical expenses. Corporations also pay income taxes. Income taxes are a cost to businesses. That cost is passed onto the consumer in the form of higher prices. Eliminating that cost by eliminating corporate income taxes will be a cost savings. Overtime they will pass at least some of the cost onto the consumer due to competition or risk losing business
Yes, people are taxed on medical expenses, but they also have the option of deducting extraordinary medical expenses from taxable income, and the costs of insurance, and with an MSA many other costs as well are taken from untaxed income. That is with our current system. While I am not advocating that system, I must admit that many of the pages of tax laws are there just to mitigate extraordinary disasters and reduce the tax burden on those who suffer them. more on that later.
People will also have more dollars to pay for medical expenses since they will no longer have income taxes deducted from their paychecks. Also factor in the prebate that will cover the cost of necessities up to the poverty level.
First off, I am happy that no one in your family has apparently required major surgery, chemo, radiation, etc. for cancer. If they had, you would be aware that the people in the above scenario are already down by one income. Under the current system, they would be taxed on less income, reduced by the amount of deductible medical expenses, reduced by any prepaid MSA deductions or the costs of the employee's partial payment for insurance.
That alleviates a fraction of the economic burden while someone is fighting for their life.
Under the 'fair tax', however, as they would be taxed on expenditures, not income, they would pay substantially more tax, even though their income was reduced by one paycheck, on top of whatever co-pays and uncovered medical expenses they have to pay--just to stay alive.
The prebate for the average 'poverty level' medical expenses' taxes (whatever "poverty level medical expenses" are) wouldn't hold a candle to the taxes on the costs of oncology drugs. In short, with a reduced income and additional catastrophic expenses, the fair tax would hit these people even harder.
You claim that eventually costs saved by industry would trickle down, but this is a time sensitive situation. There is no choice: do or die.
In addition, most of the cost of new pharmaceuticals is the attempt by the drug companies to recoup development costs in the five years they have before the drug goes generic. Don't expect much for savings in that sector.
Oncology drugs are especially expensive, often due to their composition, but also because of the reason cited above.
These factors will result in more affordable medical care in the long run compared to the income tax.
Actually, in the example above, that statement is wholly unsubstantiated.
Next example. Someone's house burns down. They have suffered a catastrophic loss. They can document the contents, their value, etc. Their insurance only covers a fraction of the value of those contents (not unusual), and what they pay for the house covers most of the replacement cost.
What it does not cover is the "fair tax" on all the replacement items. Again, the "fair tax" will kick them while they are down.
I suppose they could live in the street waiting for the savings to trickle down, but in reality, again, this is something which will not wait for that.
They have to have a place to live, and all their stuff, from toothbrushes to clothing to shoes, furniture, appliances, bedding, the works, all has to be replaced.
I suppose they could buy used toothbrushes and underwear and avoid the tax, but in reality, the tax will compound their catastrophe by tagging them another 23-30% (or more) for things they need, far over and above any prebate for 'average poverty level' purchases because they have to replace everything.
Again, when the chips are down, the 'fair tax' hits those hit hardest as if they were purchasing Rollex watches when they are purchasing things normally considered necessary to life.
Which is one of the reasons I oppose it.
Eliminate the tax on necessities (food, primary residence, medical care, energy), and scratch the Gubmint check which gives the whole idea the appearance of a Socialist 'gimmie', and I might be able to support it.
One other thing, that is the Government double dip. If a person has saved for their retirement, stashed their cash carefully, loaded their savings account and their Roth IRA, and this were to be enacted, they would pay taxes on that money a second time when they spent it (income taxes were paid once). That stinks, too.
in fact, it is unfair.
YMMV, but I remain unconvinced.
If we are going to replace the income tax, let's get something better. But before we do that, let's cut the Government, reduce the scope and spending thereof, not create more Government to redistribute monies which should never have been collected in the first place.