Under the Linder-Chambliss bill, the federal government would have to pay taxes to itself on all of its purchases of goods and services. Thus if the Defense Department buys a tank that now costs $1 million, the manufacturer would have to add the FairTax and send it to the Treasury Department. The tank would then cost the federal government $300,000 more than it does today, but its tax collection will also be $300,000 higher.Yeah that doesn't sound entirely right. Anyway it's well worth checking out.
This legerdemain is done solely to make revenues under the FairTax seem larger than they really are, so that its supporters can claim that it is revenue-neutral.
Found this article via the Daily Howler, which is always worth checking out.
4 comments:
"This legerdemain is done solely to make revenues under the FairTax seem larger than they really are,"
That's not true. Charging the Federal Government sales tax is an effort to keep the Federal Government from becoming the preferred buyer.
Under current IRS law, military members must pay income tax. IF Federal Government employees were exempt from paying income tax, the Federal Government would be seen as unfairly competing with the private sector for employees.
The real purpose of the FairTax is to take away the ability of corporations to get tax breaks by bribing legislators to write loopholes in the tax code for them.
There are many other positive side effects to the legislation as well.
Second hand items would not be taxed, resulting in more reuse.
Currently we tax the production of wealth which slows economic growth. Taxing consumption will not only reduce consumption, but will remove the disincentive for production.
It is also hoped that the high tax level will generate more public involvement in what our government is doing. Perhaps the pork can be cut out of the spending as a result.
"Anonymous": I think tho that the private sector has their fair share of tax loopholes to benefit from as well.
There are some major loopholes that no one plugs and it's driving me insane.
Don't you feel the same way?
Anonymous, "Second hand items would not be taxed, resulting in more reuse." Doesn't it mean that they become more affordable? that's great then. At least, we can find good conditions items with more affordable price.
"Taxing consumption will not only reduce consumption, but will remove the disincentive for production"
This sentence makes no sense. Reduced consumption means reduced demand, which disincentivizes production.
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