---
Letter 1
One positive cost element not taken into consideration by Mr. Moffatt, concerning the increased cost of articles and services given a 23% federal sales tax, is the reduced costs in the product itself due to the lack of taxes on profits all along the chain of production, supply, and sales. Under the current system each step of the business process must consider the reduction in profits that income taxes will cause, and so, price accordingly.
If I supply ore to a steel manufacturer, I must do so at an after tax profit, or I won't be in business very long. Likewise, so must the steel company, and those who sell their transportive services, equipment, and support services, to us; and so on up the line until the consumer buys the automobile, or the government buys the bridge. Income taxes compound upon income taxes, each cranking up the ultimate cost.
Without this chain of tax the article itself becomes, via competition, much cheaper, and so also the amount that 23% (times a smaller price) would represent. It is certainly conceivable that the final 'federal sales tax added' cost may end up being cheaper for many products than they would have cost without it under the present system. Cheaper products benefit all levels of government as well, thus, reducing their expenses and making for lower taxes than 23% that may seem necessary now.
Be sure to continue to page 2