The Fairtax and embedded taxes

[tolbiny]

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This is a fallacy. Tourism represents only a small sliver of the financial transactions that go in and out of this country. You cannot conclude the net effect on our trade balance based on the possible effects of the FairTax on tourism.

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It should be (painfully) obvious that I was talking within the context of the tourism industry (you know, by the first two lines of the paragraph). Certain areas have built their economy around tourism and they can expect to be hurt significantly by the fair tax.

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You're also forgetting that, while tourism may drop, foreign investment will rise as the US becomes a corporate tax haven.

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Investment will be encouraged in certain areas (those that can export their products and avoid the sales tax) and relatively speaking discouraged in others (those that cater to the American consumer). So we can expect a small segment of the population will benefit at the expense of the rest of the population.


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You're ignoring that much of this 23% tax is already imbedded in the price of goods (because of corporate taxes that are passed on to the consumer).

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The "23%" tax rate is in reality a 30% tax rate. The 23% comes from a math trick where the final tax total is figured by taking the price of the good + the tax as the total price. IE a good costs 100$, taxes are 30$, the "tax rate" is figured by the dividing 30 by 130, instead of 30/100. My estimate of the price increases being in the 25-30% range is giving some credit to coporate tax rates.

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The rate of evasion for current sales taxes (which, in TN for instance is approaching 10%) is much lower than for income taxes.

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Sales tax rates will increase to rates greater than income tax rates, we can be pretty sure that attempts to avoid those taxes will increase as the benefits for avoiding them increase.

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These businesses are already doing this work for the collection of state sales taxes. Under the FairTax, state governments collect the federal sales tax at the same time they collect the state sales tax. The businesses operate more or less the same as far as tax collection and accounting go.


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If the federal government actually implemented a simple mechanism for figuring the taxes that was similar to what states use currently (or switched to) I will concede this point. However this is not SOP for large, bloated governments like the US.