Lawful Evil (lawful_evil) wrote,
Lawful Evil
lawful_evil

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Fair Tax

The latest issue of Money has an article on the 'Fair Tax'. The change is to move away from payroll taxes and to a tax on consumption. In the end, I have to say I would support this move. Why? What effect will this have on the system?

1. People with existing money will have to pay an additional tax when they spend that money. This will 'hurt' rich people and the elderly. The rich people I'm not really concerned about. The elderly have already paid income tax on the money and now have to pay another tax when the spend the money.
2. It will lower the numerical value of wages. The take home pay of people would remain the same, but the actual salary would decrease. This has no effect on the wage earner, but the businesses will pay lower salaries and can either take larger profits or pass the savings along as lower prices.
3. It will lower the cost of American made products. When #2 above goes into effect, the passed on price savings result in lower prices for American made products.
4. It will raise the cost of Foreign made products. The Fair Tax adds a 30% markup to existing prices. The base price of foreign goods did not benefit from the removal of income tax and therefore remain the same. The sale price increases by 30%
5. Lower prices on american made products result in more sales. This results in higher employment levels within the USA. That, in turn, lowers all kinds of things. Lower Welfare bills. Lower Hospital bills, because there are fewer uninsured patients to cover in the overhead budgets.
6. Simplified tax code. Sure, people who work at H&R Block and the IRS will probably lose jobs in the short run, but in the long run, I think this will create jobs(See #5). This will also reduce the cost on the tax payers to cover the cost of collecting taxes. How many billions are spent each year in the IRS? All of that would be saved.

Yes, it means I will have to be double taxed on the 400K I already have, but I think it is right for America, even if it hurts me.
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