[ale] fair tax

[Chuck Huber]

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ale-request at ale.org wrote:

> Message: 4 Date: Fri, 16 Mar 2007 16:17:27 -0400
> From: "Matt Kubilus" <mattkubilus at gmail.com>
> Subject: Re: [ale] OT fairtax isn't
> To: "Atlanta Linux Enthusiasts" <ale at ale.org>
> Message-ID: <fccc61560703161317n1da415e5mb4657cc00f5d0afd at mail.gmail.com>
> Content-Type: text/plain; charset=ISO-8859-1; format=flowed
> On 3/16/07, Jeff Lightner <jlightner at water.com> wrote:
>> > Well we'll have to agree to disagree.
>> >
>> > Confusing because of "prebates".   I don't see the need.  If you only
>> > make $1000 a year you pay significantly less than someone making
>> > $1,000,000.
>> >
> 
> But the tax for the person making $1000 is going to reduce the ability
> of the destitute to buy bread, whereas tax on the person making
> $1,000,000 reduces their ability to buy a 17th BMW.

Well, that's not how the prebate is designed to work.  A prebate will be issued
to every head of household based on the number of people the head is supporting.
The amount of the prebate will be 23% (the consumption sales tax) of the cost of
the necessities of life.  i.e, food, housing, etc.  So an impoverished family of
four that's spending every penny earned on surviving would receive an advance on
the 23% they will pay each month, effectively giving them a tax-free situation -
the same that they have under the current system.

A wealthy family of four, however, would receive the same *amount* as the
aforementioned family.

The basis in reasoning for this is that nobody should have to pay taxes on the
necessities of life.

Determining what the "necessities of life" are and how much they cost is up to
the politicians, hopefully with input from the Census bureau and various industries.


> It's a question
> of what is just in a society.  Do citizens have a basic right to the
> necessities of life in the wealthiest nation in the world, or do
> citizens have the right to sit on 'their' pile of cash and watch the
> nations infrastructure crumble around them.

One could construe the right to "life, liberty, and the pursuit of happiness" to
include the bare necessities of life.

I'm not sure how you arrive at the conclusion that if one sits on their prebate
that the nation's infrastructure would crumble.  That person will still have to
make purchases.  Nor do I understand how one philosophy (using the prebate to
pay the tax on bare necessities) or the other (sitting on it) is relevant to a
tax system.  Under the current tax system, if everyone sat on the money they
earned, everyone would starve to death thereby alleviating the need for *any*
infrastructure.

> 
> What has anyone figured that this sales tax economy will cost per
> dollar.  Tennessee (no state income tax) has a %9.75 tax on all goods,
> food or BMW.  Georgia income tax is about a fourth of the state income
> tax, so round about %50 on all goods.  That's going to be some
> expensive milk and cheese, let me tell you.

Not exactly.  The 23% national consumer sales tax will remove what's called
"embedded taxes" in purchased goods.  Note that in order to sell a product, a
company must make enough on the sale to pay not only corporate taxes, but also
all the payroll taxes of the employees used to manufacture and distribute the
product.  Without such a burden, the cost of goods will drop by about the same
amount of the additional sales tax.  Additionally, the cost of the raw materials
used will drop for the same reason.  Be sure to also consider the entire chain -
from raw materials, cost of production (labor, power, facilities, etc), *and*
the cost of distribution through distributors and retail outlets.

One can examine the process of producing a loaf of bread.  The raw materials
cost will drop; the cost of production will drop because the bakery no longer
has the burden of payroll taxes; the cost of distributing the loaf of bread will
also drop for the same reasons - the employers of everyone that touches that
loaf all the way down to the retailer's shelf no longer have payroll taxes
burden.  The bottom line is that if you are paying $1.00 for a loaf of bread, it
will reduce to about $0.81.  Add 23% of that 81 cents back in and you're back up
to a $1.00.

The point here is that the cost of the goods you buy will drop.  The motiviation
for a manufacturer to drop the price in accordance with his new lower cost is
competition.  If one baker sells a loaf for $0.81 while another holds his price
at $1.00, who do you think will sell more bread?  Don't you think that the
second baker will actually see a loss of revenue because most customers have
moved to the first baker?  Thus, in order to retain market share, the second
baker will *have* to lower his price to remain competitive.

Enjoy,
     - Chuck

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