You have totally ignored the cost of complying with our current tax system. I have yet to read about it in any of your writings. It must cost something to fill out all of those forms, and to hire all of the accountants. What about the $8 billion that the large accounting firms took in, in 1997? I read in a recent newspaper article that Madison, the capital of Wisconsin, sent 32 tons of tax forms to Milwaukee. That's just Milwaukee, and only one city in one state. We have a tax system in which the forms we send to the IRS would go around the Earth 36 times if we placed each sheet end to end. Crushing indeed!
I'll give you that one. I hate trying to decipher all those forms.
I understand the FairTax proposal allows for very simple collection and remittance to the state. Of course, at one time so did our income tax system. What safeguards will be in place that the FairTax doesn't become overrun with exceptions and extra taxes once special interest groups get a hold of it?
6. I agree that's it's naive to think companies will start cutting the pay of their employees. If they don't, though, how is this huge drop in prices we're supposed to see come about? Where are these "reduced costs of production" going to come from? If the companies are spending more money on health care, then shouldn't prices go up, not down?
It is illegal in most states to reduce an employee's wages without both the employer and the employee signing an agreement to do so. The Fair Labor Standards Act does not allow employees' wages to drop below the minimum wage. If you employed ten people and announced to them that you were going to reduce their wages by 25%, what is your sense as to how these people will react to you? What if you employed 100 people?
That's why I said it wouldn't happen
They are not reduced costs of production. They are reductions in the cost of compliance, which you have yet to approach in any of your writings.
Where are these substantial drops to the cost of business compliance going to come from? In fact, haven't we just added more work to businesses as the entire revenue stream of the government is to be collected by businesses? Since there will be a 20 or 25 or 30% sales tax rate (whatever the final number ends up being), there's going to be a big incentive to try to evade these taxes. Businesses will now have to police their customers, to make sure that anything they claim is for business use isn't actually for personal use. This is why almost every country in the world has gone to a VAT system. The opportunities for tax evasion are quite high otherwise, and there's the risk that the government asks to police the purchases of it's customers. An income tax audit is bad enough, but how about an audit of everything you've sold in the last six months and who you sold it to? You have to be dreaming if you think we can get rid of all the tax auditors. If we do, too many people will evade taxes.
What does health care have to do with the subject matter?
To be honest, I have no idea. A couple people have brought up that FairTax will cause either better health care plans for employees or lower health care payments. I can't figure out how they expect this to happen.
Be sure to continue to page 4 for the next part of the letter.
