Rep John Linder first introduced in 1999. The fair tax is the national sales tax. All US taxes except import tarrifs would be repealed and replaced with a sales tax on all new goods and services at a rate of 23.00 of tax per 77.00 of sales.
Steve Forbes proposed the flat tax. The rate has been basically 17% but there are several different basic deductions as to where the tax starts.
Biggest difference is the flat tax only repeals the current income tax whereas the fair tax removes all domestic taxes including social security and medicare. The flat tax does not alter corporate tax rates but the fair tax eliminates all corporate taxes. Now before some of you get into a tizzy about no corporate taxes, that is what makes the fair tax work. Corporations by their very nature do not pay taxes.
The cost of a good or service tends to be determined by adding all of the associated costs, including taxes paid, and add a profit margin. The rest is simple supply and demand. The theory behind the fair tax is that 20 to 25 percent of the cost of an item are the taxes that have been paid all along the line by the companies providing the good or service. Removing that cost should produce a similar cost reduction in the cost of the good. Now I know some will say the companies will just be greedy and keep the extra 20 percent and not pass it on. In my opinion, that is highly unlikely. It will only take 1 company to cut its price to reflect the reduced tax burden and all of the rest will have to follow. Simple rules of supply and demand. If one company reduces its price, everyone will want to buy from that one company. If the rest do not follow, the will lose sales and begin to lose money. Eventually the price point will be set by the market where demand and supply meet.
The only other thing is in order for the fair tax to work, the 16th amendment must be repealed so you do not end up with a sales and income tax too.
And surveys done have shown that companies world wide would see the US as more business friendly if the tax code was changed in this manner and would consider moving business assets to the US from overseas to obtain it. It will not remove all of the gov red tape that the US imposes, but it is a big piece of it.
The fair tax is the way to go from where I sit, but either system is a quantum leap above what we have now. But to completely fix the problem spending will still need to be reeled in. But that will be another thread.
Re: Another
Member #: 61931
Registered: 9/16/2008
Posted:
963
Occupation:
Tower Contractor
Location:
PA
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mid 50s
Experience:
~37 years
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