Subject: I support a national consumptio tax Comment: To the members of the Tax Reform Panel, I am writing today to express my support for a national consumption tax. When enacted, it replaces the entire federal income and Social Security tax systems, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. An added bonus is the abolishment of the often-intrusive Internal Revenue Service. Please allow me to demonstrate a practical application of this legislation. The December 26, 2004 Wichita Sunday Eagle ran a front page article describing the feud between Boeing and Airbus. Boeing's 7E7 commercial jetliner will cost $120 million while Airbus' A350 costs $150 million, but Boeing charges that the European Union gives Airbus billions in subsidies to better compete with Boeing. According to Dr. Dale Jorgenson of Harvard University, companies add federal income taxes of between 20 and 30 percent to the price of all retail items. So, if we apply Dr. Jorgenson's statement to the price of the 7E7, a cost ranging of between $24 million and $36 million of the $120 million price tag is the hidden federal corporate income and employer payroll taxes and the costs of compliance. This is not to say Boeing alone is deliberately jacking up the price of its 7E7 aircraft with such high income taxes. Subcontractors also play a role. For instance, the engines Boeing uses might come from General Electric. The tires might come from Goodyear. The avionics might come from Honeywell. Boeing does not construct the windows in its aircraft, nor does it create the carpeting, seats, toilets, the galley equipment, etc. Each subcontractor passes along its corporate income taxes and employer payroll taxes in each piece of equipment it sells to Boeing. So, at each stage along the supply chain, the cost of corporate income taxes and employer payroll taxes accumulate, until these taxes become a significant portion of the cost at the final stage of production. Furthermore, the WTO has ruled that these taxes are not border adjustable, putting American manufacturers such as Boeing at a district competitive disadvantage with their foreign rivals, in this case, Airbus. The Fair Tax, on the other hand, exempts exports, so American-made products would reach foreign shores with no federal taxes embedded in them. If Boeing and all its subcontractors could be freed from corporate income taxes and employer payroll taxes, the price for each 7E7 would range from $84 million to $96 million! Wanna bet Airbus (and the European Union) scream foul? Let them bellyache, I say. Boeing would not be the only U.S. Company benefiting from the Fair Tax. All U.S. companies would benefit, like Detroit's automotive industry. Even in Wichita, employers like Raytheon, Textron, and Bombardier can better compete with their foreign counterparts. And with surging domestic sales comes a sharp increase in the level of job creation and employment!!! I ask you, gentlemen, can America afford to pass up an opportunity to regain prominence in the industrial world? Please, I urge you to recommend the national consumption tax concept to President Bush. Sincerely Yours, Bradley Kramer Wichita Kansas |