The tax plan that's better than Cain's, Perry's or Gingrich's

Renew America ^ | Selwyn Duke

[Paladins Prayer]

Bold tax reform is front and center this campaign season. First Herman Cain made waves and poll headway with his 9-9-9 tax plan, which involves national 9-percent taxes on personal and corporate income and a 9-percent national sales tax. Now Rick Perry has followed suit with a 20-percent flat-tax plan, and Newt Gingrich has gone 5 better, with a 15-percent flat proposal. And these ideas certainly haven't fallen flat: tax reform is immensely popular among the Republican base.

Yet there has been criticism, too — at least of Cain's plan, the only one around long enough to be criticized. Many are concerned about giving the feds another vehicle — a sales tax — through which to fleece us. Sure, 9-9-9 sounds good, but what is to stop it from becoming 10-10-10, then 11-11-11 and ending up as 30-30-30? Yet, national sales tax or not, this threat looms with any plan; what is to stop Perry's 20 percent or Gingrich's 15 from becoming 40? Remember, the one-percent income tax sounded good, too, in 1913, but consider what it has morphed into.

So, yes, this threat exists with any plan.

That is, except one.

The plan I've been proposing for years.

[Bigun]

I don’t know what you are talking about when you say “...claiming business costs will drop because the taxed portion of my gross is “built into” the cost of items produced by the business.”

What I do know is that the proprietor of the business would no longer be paying a matching 7.65% of your salary in payroll taxes and ALL of corporate taxes and all of the costs of compliance currently embedded in the prices of the product(s) or service(s) he sells would be removed under the fairtax. Of course the price drops made possible by this would be much more modest for items with short manufacturing supply chains than those with longer manufacturing supply chains.

The corporate income tax and all the attendant costs of dealing with it are, in practice, nothing more than a VAT. They get passed on from the miner in the price of the ore he sells to the smelter. The smelter passes them on to the steel mill etc. etc until product or service is finally sold to the retail consumer who finally pays them all.

[Myrddin]

So the only savings is the social security contribution from the employer coming off the bottom line. Any corporate income taxes are always priced into the final product. Eliminating corporate income tax would allow a lower end product price.

[Bigun]

You got it but please note that even if a company ends up not owing a dime in corporate income taxes they will still have incurred a great deal of costs in just dealing with the law! These to find their way into prices and would would also go away with the advent of the fairtax!

[Myrddin]

I agree that the reduction of compliance costs would be valuable. My company simply outsourced payroll to ADP. The Fair Tax would changed ADP's business model a little. Currently, I'm also subject to state income tax that is collected for every state where I work 20 or more days in the calendar year. This year, I'm compelled to pay CA and ID state income tax (proportionately). I may be hit with NE as well depending on whether a pending business trip exceeds 20 days. A big boon for Intuit as they sell me two or 3 state tax packages.