Letter 3 Continued
3. I must say that I was surprised about your concern that the FairTax is deflationary. That is one that I haven't heard before - and I have heard many, many debates on this issue. The usual concern is that it would be inflationary, and we have some very respected economists who have assured us that it is not. The price reductions are real and they will occur in a free market economy where businesses compete for market share all the time. They will largely offset the imposition of the new NRST. The FairTax is neither inflationary nor deflationary. As I said above, noone that I know who supports the FairTax expects employers to decrease wages.
I am out of time, so I have to run. I do have some other comments on some of your other points, but I will have to save them for another e-mail.
Thank you for addressing the FairTax and providing us a forum to debate this very well thought out proposal.
---
Letter 4
Al Ose's article is a good one, but some aspects of the benefits of the Fair Tax bear repeating.
Dr. Dale Jorgenson, highly regarded economist of Harvard Univ., has found that 20 to 35 percent of U.S. goods and services are "embedded" taxes; that is, for that $10 item you are buying today, $2.50 is "rolled up" or embedded taxes. This happens because a business must recapture all its costs, plus a little profit, in order to stay in business. So businesses aren't the real "payer" of taxes, they're customers are. Our industrialized trading partners know that, so they use a "Value Added Tax" wherein they keep track of the taxes as the product moves from one manufacturer, or transporter, to the next in the process of producing an item. Then the Europeans have that tax paid at the cash register, UNLESS it's exported. In that case the tax is rebated to the producers. So no tax on exports. Those products come to the U.S. and compete with similar products with "embedded" U.S. Taxes. The U.S. product losed the price competition.
On the other hand, when a U.S. producer sends his product to Europe or Japan, with the embedded taxes included, the Europeans and Japanese add the V.A.T. to the final cost. Thus, the U.S. product is not price competitive abroad or at home.
This accounts for a large share of lost sales and, thus, jobs from America.
We need the Fair Tax YESTERDAY!
