Daily Record published my letter that updates Fair Tax impact on US economy
Ted asked I publish this here
I sympathize with Helen Reed per her letter “Why has the US fallen into despair”. She concludes that we must “make our country self-sufficient before violence, disrepair, and poverty become our way of life”. This may reference Greece. Last week, a severe decrease in Greek bonds values lead to Cyprus banking failure. European social welfare policies that depress economic growth (ex: Spain 26% unemployment) while exponentially increasing debt threaten all of Europe even Germany. Left unchecked the US will soon follow Europe’s fate. So how can the US reverse course?
A great first step is to reform our tax code from one that rewards crony capitalism and also encourages politicians to distribute wealth to those no longer motivated to apply their talents to create wealth. Many large companies have secured special tax breaks up to almost $150 billion per year, protecting them from competitive and innovative small companies. Entrepreneurial start-ups and small private companies have been the main drivers for economic growth and new jobs. The Fair Tax, now in Congress as HR25, eliminates all deductions. It also eliminates federal personal and corporate income and payroll taxes and replaces that with a consumption tax. This will empower the private sector to significantly lead us back to prosperity as our businesses will be able to more strongly compete globally. The Fair Tax also protects the truly poor via prebates up to poverty level to offset the consumption tax impact. To learn more please visit www.fairtax.org.
The link – note I corrected a typo on-line and above.
. Note I corrected on-line a typo
Sorry ***** TYPO I corrected on-line and above – should be almost $150 billion not almost $900 billion —
“Many large companies have secured special tax breaks up to almost $900 billion per year, protecting them from competitive and innovative small companies.”
I believe “total” (NOT corporate only) possible annual tax deductions are approx $900 billion / year.
above link reports that corporate tax loopholes will cost the U.S. government $628.6 billion over the next five years, according to a 2010 report from the Tax Foundation. One would be very hard pressed to argue that any of these deductions will add a net dollar to GDP.
The United States has one of the highest corporate tax rates in the world, at 35 percent (not including any state levies), yet the actual amount in corporate taxes that the government collects (“the effective tax rate”) is lower than those of Germany, Canada, Japan and China, among others. The reason is confusingly called “tax expenditures,” a doublespeak term designed to legitimize special interest tax breaks and loopholes.
It is these ‘expenditures’ that will cost the U.S. government $628.6 billion over 2011-2015.
More info regarding Fair Tax
Today’s taxes penalize thrift, effort and productivity. The FairTax encourages these attributes by taxing only consumption without hurting it. Though a sales tax, it is friendlier to the poor than our current system.
How is this possible? For three reasons. First, the FairTax removes tax costs, including the tax compliance costs that are passed onto consumers in the form of higher prices of goods and services. These hidden taxes hurt the poor most and are regressive. Removing tax costs drops prices.
Second, the FairTax removes payroll taxes, which are highly regressive and hurt the poor most. Removal of these taxes, together with removing income taxes, gives people more money to spend or save. Their purchasing power actually increases despite the tax. People on every rung of the economic ladder benefit.
Third, the FairTax provides for a payment from the Social Security Administration to every household in the US whose members are either US citizens or lawfully residing non-US citizens. The program is easy to administer because 70% of American households already depend on the federal government for a benefit. This payment reimburses each household, on the sole basis of family size, for taxes on spending up to the poverty level – as determined by the Department of Health and Human Services. This “pre-bate,” and other factors, make the Fair Tax progressive, even though it is a sales tax. Low-income people can save tax by buying used items. And education, their ticket out of poverty, is not taxed as explained above.
Who pays more under the FairTax? Foreign tourists who pay for hotel rooms in New York. Criminals who use the proceeds of illegal activity to buy goods and services. Undocumented immigrants who buy food, clothing and pay rent – they do not get the pre-bate. Spendthrifts who consume wealth. The FairTax is a wealth tax that gets at wealth when it is consumed. The FairTax stops making winners and losers.
Exports and investment in American business booms under the FairTax because American-based companies can produce goods and services without a tax cost component. The United States becomes the world’s tax haven because savings and investment no longer are penalized as they are today. Jobs and $12 trillion worth of offshore capital comes back to America in months. The FairTax is transparent, efficient, fair, and promotes economic growth.
Re: the poor:
payroll taxes are highly regressive and hurt the poor most. Removal of these taxes, together with removing income taxes, gives people more money to spend or save. Their purchasing power actually increases despite the tax.
Re: Prebates: http://www.fairtax.org/PDF/PrebateExplained.pdf
More great details: