THE FAIRTAX BOOK Page 84, 85
…. poor would see an immediate 25 to 30 percent increase in their take-home pay.
Second, remember that even more taxes are already inflating the retail prices we all pay in the form of embedded taxes buried in the cost of all consumer goods. As soon as the competitive forces of the free market work their magic, as they always do, consumers of all incomes will be paying less for virtually everything they buy, including the basics of food, clothing, shelter, and transportation. Yes, they’ll have to pay the new national sales tax, but when you factor in the combined lower prices/higher take-home pay caused by the disappearance of the embedded taxes, you’ll see that the total price paid for consumer goods will remain very nearly the same.
So. . . just considering these factors, and these factors alone, the FairTax delivers a winning hand to people living below or near the poverty line. They get every penny they earn on payday and, when you factor in the FairTax and the lower prices, they’ll actually be spending less of their money for a retail purchase than before.
To get a handle on how this would play out, pull out your calculator. Let’s say that a single mother with two children spends $45 a week on groceries. The removal of the 22 percent embedded tax would bring the price of those groceries down to $35.10. Add the FairTax, and the groceries would cost $45.58 – just a few pennies more. But remember, under the FairTax Plan, this single mother with two children now gets to take home 100 percent of her paycheck. If employers fail to take taxes out of price, the addition of formerly-withheld income taxes and payroll taxes to her paycheck will give her a 25 to 30 percent increase in take-home pay. . . and in exchange she’ll pay 23 cents to the tax man in every dollar spent. Does that sound like such a rotten deal to you?
But that’s not the half of it. (to be continued)
Comments: The second half of this will follow shortly. There are other factors that are indirect but very powerful which will also benefit the poor, such as a greater demand for workers putting upward pressure on wages. This is described in the book.
I hope you are enjoying this! Grimmy
Are you sure it’s “FairTax” and not “FairyTax”? Because this sounds like a nothing more than a fleeting fantasy to me, a la Tinkerbell and Peter Pan. One big clue: the phrase “the competitive forces of the free market [will] work their magic, as they always do.” Except that this is not Neverland, there is no such thing as magic, and they DON’T always do! (Otherwise, why would the field of economics include a concept known as market failure?)
I know you started in the middle of the book, Grim, and I have not read it myself, but are you sure it doesn’t begin with the phrase, “Once upon a time…”?
Comment by Harry Vellum — September 3, 2007 @ 9:43 pm
Harry, thanks for the passionate response.
The FairTax may not work as well in practice as in theory (Fairyland).
However, I think it’s far and away an improvement over what we now have. I fear, however, what congress will do to it if they get their hands on it… But this doesn’t give me much pause. I really think this is an idea whose time has come and is very exciting. Part 2 later on today – which is more of the same.
Please go into Barnes and Noble, pick up a copy of the book, and thumb thru it.
Grimgold
Comment by grimgold — September 4, 2007 @ 9:49 am
Your first argument seems to be that the magical free market will leave a 25-30 percent pay increase under everyone’s pillow, Grimmy.
Or, do we have to put up a FairTax tree to find our presents from supply-side Santa on Fair Tax morning?
Better try again.
-Volt-
Comment by Volt — September 4, 2007 @ 10:38 am
Volt, you are expressing European style cynicism. No matter how grumpy you may be about it, the free market works. Our nation is a shining example of that. I’m saying we can improve, and the FairTax is one excellent idea in that reguard.
The criticism expressed was that the poor would be worse off, not that you’d receive free money.
I have answered that criticism.
Grim
Comment by grimgold — September 4, 2007 @ 11:59 am
Good schtuff, Grim. Keep it coming.
Comment by Ian — September 4, 2007 @ 10:27 pm