(The after tax price of consumer goods will go up due to the sales tax. However the pre-tax price of consumer goods is likely to fall since increased productivity will cause an increase in the supply of goods. We have seen that we cannot be sure whether or not there will be an increase or decrease in demand for consumer goods purchased within the United States. The price of these consumer goods will increase but not by the full amount caused by the tax increase.) I wonder if you could take another look at this? Our tax system does cost us something just to comply with it. Estimates vary from $250 to $500 billion. You probably know that businesses collect taxes, they don't pay them. When we rid ourselves of these hidden (corporate) taxes, and all of the paperwork associated with our tax system prices will drop between 20 and 30%. This is per the research of Dr. Dale Jorgenson.
(Economist William G. Gale at the Brookings Institute has determined that most low income families will pay more taxes. "Under the Americans for Fair Taxation proposal, taxes would rise for households in the bottom 90 percent of the income distribution, while households in the top 1 percent would receive an average tax cut of over $75,000.) All dynamic studies have shown that the poor will be better off under the FairTax. The FairTax is actually a tax on accumulated wealth.
(The 23 percent tax rate quoted is a tax-inclusive rate. However tax rates are normally quoted as a tax-exclusive rate. The FairTax plan has a tax-exclusive rate of over 30 percent, which may be difficult to sell to voters.) Our income taxes are quoted at inclusive rates. The people who wrote the FairTax did the right thing to compare the FairTax to our current tax system. (The possibility of having both an income tax and a sales tax The national sales tax is desirable because it replaces income taxation. However there is nothing restricting the government from having both a nation sales tax and an income tax. Repeal of the 16th amendment would make income taxes illegal, but repeal seems incredibly unlikely. If the government was able to tax income, they probably would.) The third step of the FairTax plan is to write an amendment to repeal the 16th Amendment.
----
Thank you for your very thoughtful letter,
You are right in saying that the "FairTax is actually a tax on accumulated wealth". I think that might be the biggest reason why it will never pass. Senior citizens as a group have the largest accumulated wealth of any demographic group and they'll get hit hardest by the tax. I can't imagine a tax plan that hits the elderly the hardest will ever be implemented, particularly when it also gives a break to the highest income earners.
Having the 16th amendment repealed is a very important part of the FairTax proposal, or else we might wind up with both an income and a sales tax. I just can't imagine this having support in enough states to ever pass.
Thanks again for writing,
Mike
Be sure to continue to page 4 for the next letter.
