Eomund on 04 January 2008
| Final-Fan said: Eomund said: The idea that the company will not reduce the prices once the FairTax is implemented is a myth. The capitalistic marketplace would ensure that the companies would keep prices as low as possible while still turning a profit. Currently there is an embedded tax of about 22% in every thing we buy. This embedded tax is the Corporate Taxes, Payroll Taxes, etc. that the government collects from companies already. They want to make a profit so they pass the costs of the taxes and the cost of tax compliance on to the customers in the form of higher prices. This 22% is already an INCLUSIVE tax and would simply be replaced by the FairTax rate of 23% INCLUSIVE. Therefore the prices will stay about the same as they currently are. The cost of Tax Compliance is a fairly large portion is relation to how much income it provides to a company (hint: it helps bring in less than $1). The cost of Tax Compliance for our entire country in the year 2005, 6 billion hours of individuals, businesses, and nonprofits. This effort added up to about $265 billion spent in COMPLIANCE ALONE! With this information we could assume that prices would go down since Compliance costs of the FairTax is a tiny fraction of what it currently costs. These costs would set off other price decreases for the consumer. FactCheck.org says: "But the FairTax Will Lower Prices" Proponents of the FairTax point out that prices on consumer goods contain what are called “hidden taxes.” Under current law, corporations have to pay taxes on their earnings. Moreover, businesses have to pay social security taxes for each employee. The money to pay these taxes has to come from somewhere, and FairTax supporters argue that the cost is passed on to the consumer. In fact, the best-known proponent of the FairTax, talk-show host Neal Boortz, argues that 22 percent of the price of a consumer good is really a “hidden tax.” Get rid of corporate and social security taxes, Boortz argues, and consumer good prices would drop by 22 percent. Even with the 23 percent FairTax, prices stay the same, and with the elimination of income taxes, paychecks will get bigger. Everyone gets a raise and the federal government still gets its revenue. About 10 percent of the e-mail messages we received from FairTax proponents trumpeted this kind of magic act. It is easy to understand the confusion on the issue, as Boortz himself made similar assertions in the hardcover edition of his book. (He later issued a corrected version in paperback.) A bit of critical analysis shows that this cannot be right. The FairTax is revenue-neutral. That means that for every tax dollar collected under the current system, the FairTax has to collect a dollar. If the FairTax exactly equaled embedded taxes, then it could not possibly be revenue-neutral, since embedded taxes do not take into account personal income or estate taxes. The FairTax rate would have to be high enough to replace embedded taxes plus income and estate taxes. Chris Edwards, the Cato Institute's director of tax policy studies, points out that prices do not really matter; corporate, payroll, income and estate taxes currently generate approximately $2.4 trillion, and a revenue-neutral FairTax would still require that taxpayers pony up $2.4 trillion. Nor is it clear that the 22 percent embedded tax figure is particularly meaningful. David Burton, chief economist of the Americans for Fair Taxation, calls it "simplistic" to think that the entire cost of corporate taxes is borne by consumers. Cato's Edwards suggests that while consumers do pay at least part of the costs, producers also bear some of the burden. That is, employees pay part of the costs of hidden taxes (in the form of lower wages), and corporate shareholders pay another portion (in the form of lower returns on their investments). |
| Country | Subject Descriptor | Units | Scale | 2006 | 2007 | 2008 |
|---|
| United States | Gross domestic product, current prices | U.S. dollars | Billions | 13,244.550 | 13,770.309 | 14,418.482 |
So the 2007 GDP of the US is $13.77 Trillion and 22% of the embedded taxes alone = over $3 trillion in current taxes.
The FairTax : $13.77 trillion @ 23% = over $3 trillion in taxes raised.
Hrmm... Taxes will still be the same amount raised. There is no magic to it, just simple math.
