Subject: Meaningful and Lasting Tax Reform
Comment: Today I enjoy a 23% advantage over American companies I compete against. I import industrial commodoties crom China and other foreign sources and sell them to US heavy industry such as the steel industry. Because there is no mechanism to remove businesses taxes from goods and services produced in the US, this tax cost is added to the prices of US produced goods and services and today averages 23% of the retail price of US produced goods and services.
This is good for my import business as my products don't have much, if any, taxes embedded in my prices, so I can usually beat the price of my US competition. Although this is good for me in the short run, it is not good for my fellow Americans whom are losing their jobs and no longer contributing to our society or to our tax revenues.
A value added tax (VAT) will solve this international competitiveness issue, however it is administratively inefficient and will have a significant compliance cost that will in turn be passed on in the prices of everything produced in the US. It is also a hidden tax which is unhealthy for our liberty and economic freedom. All taxes should be visable to the public if we are to be in control of our government. If citizens can see what they are paying for government then they have an opportunity to control the government. This is necessary if we are to be free.
The ideal solution is a tax proposal known as the FairTax (HR 25/S 25). The FairTax eliminates the business income taxes and payroll taxes and will result in a ~23% decrease in the cost of US produced goods and services. This will eliminate the competitive advantage of my imported goods that I enjoy today and likely put my company out of business. This will be a small price to pay for the benefit of my country and American posterity.
Below is a short article that I wrote for the media that outlines other key reasons why the FairTax is the only real Tax reform alternative.
REAL TAX REFORM, TO BE OR NOT TO BE
There is little doubt that legislation will be passed that will be called tax reform. The real question is whether the legislation will provide substantial and lasting tax reform or just some tinkering or transient tax reform.
Without REAL tax reform we will continue to lose our ability to compete in the international market place, resulting in the continued loss our productive capacity and standard of living, and eventually, erosion of our ability to defend ourselves militarily.
Tinkering with the current tax code is not a solution to our tax code problems and the impact of these problems on our economy and country. For reasons pointed out below, a flat income tax is politically unacceptable and, at best, only a partial and temporary solution. A value added tax (VAT) system will only add to the complexity of our tax code, add to the compliance cost of businesses and result in increased prices. The only complete and permanent solution is a particular national retail sales tax proposal known as the FairTax. The FairTax Bill is currently before the US House of Representatives and Senate as HR 25 and S 25, respectively. The FairTax replaces all income taxes as well as Social Security, Medicare, gift and death taxes with a simple retail sales tax.
The FairTax is the only real tax reform alternative for four major reasons:
1) Harvard Economist, Dr. Dale Jorgensen conducted a study that found that an average of 22% of the retail price of all goods and 25% of the retail price of all services produced in the US is the cost of business income and payroll taxes required by the current tax code. The combined average of this hidden tax included in goods and services is in excess of 23%. Like the cost of utilities, raw materials, etc., the cost of taxes are passed on to the consumer. With a flat income tax these hidden taxes will continue to be included in the prices of U.S. produced goods and services. The result is that American-produced goods and services will continue to suffer this 23% competitive disadvantage, and our balance of payments and trade will continue to worsen as America loses jobs. The FairTax removes this hidden tax from the price of American-produced goods and services resulting in an influx of companies and Jobs to the US.
2) A flat income tax, even with a low income exemption, doesn’t adequately protect the poor because it leaves in place the very regressive Social Security and Medicare taxes as well as the 23% hidden tax that is included in the price of everything we buy. The FairTax provides a monthly check to every household, based simply on the number of Social Security cardholders residing there, in the amount that the sales tax would be on purchases up to the poverty level. In essence, it untaxes the poor and causes the sales tax to be progressive (tax rate increases as expenditures increase) as expenditures above the poverty level increase.
3) A flat income tax will reduce tax compliance/paperwork cost only slightly. A conservative estimate of the compliance cost of the current tax code is $250 billion annually. Estimated compliance cost of a flat income tax is ~$150 billion annually. Compliance cost for the FairTax is $12 billion annually (including the cost of issuing the rebate checks that protect the poor and cause the FairTax to be much more progressive than the current code.)
4) A simple flat income tax will remain neither simple nor flat for very long. The current code is a flat tax on income 90 years later. Since the Reagan tax-flattening legislation of 1986, there have been over 10,000 changes to the code and the addition of tax brackets. As long as we leave the income tax-related institutions in place, any flattening and/or simplification of the tax code will be very temporary.
In our attempt to reform the tax code, if we decide to tinker with the current tax code, adopt a VAT or a flat income tax, or adopt a sales tax that doesn't include revenue for Social Security and Medicare, we will have lost the opportunity for REAL and lasting tax reform for at least a generation, and risk our economic viability and national security.
There is no greater legacy for us to leave our country and posterity than to replace the current incomprehensible, loophole-riddled, inefficient, intrusive, and coercive income tax with a simple, fair, efficient, un-intrusive, and voluntary tax system intended by our Founding Fathers, such as the FairTax. Just think, NO MORE TAX RETURNS!!!
To learn more about the FairTax Bill and the $23 million in research behind it go to www.fairtax.org or call 1 (800) 324-7829.
President, Orient American Ore Co.
5620 Clato St.
Kalamazoo, MI 49004
Phone/fax: 269 345-0950
Cell: 586 530-3298