Hidden Taxes
Okay, I'm gonna do the math for you. There's about 22% in hidden taxes in every item you buy. That's because as the manufacturer purchases the materials to make an item, (s)he has to pay tax on it. When the manufacturer sells to the retailer, those taxes are in the cost. When the retailer sells to you, you are the manufacturer's cost (which includes all the costs of manufacturing the item including any taxes paid) and the tax when the retailer bought from the manufacturer. Business always passes its costs on to the buyer. That's on every item you buy, including, but not limited to a loaf of bread, to a Bic pen, to the car you drive, the house you live in, concert tickets, CD's, iPods, the computer you are reading this on, down to and including your unmentionables.
Here we go:
Let's say an item costs $100 (I've rounded up for the sake of convenience in math, but one penny or five won't make a difference in this lesson). Under the FairTax bill, price will drop (maybe not right away, but very quickly. Trust me, competition will bring prices down) about 22%. No taxes, remember?
$100 x 22% = $22
$100 -$22 = $78
Now we add in the consumption tax. Yes, it will be about 30%. Don't get excited! Bear with me, you'll see that the price won't be that much different from what you are paying now.
$78 x 30% = $23
$78+23 = $101
If you live in a state with a state sales tax like Florida, you will have to pay the state sales tax. You know that can vary depending on the county, but here we pay 6.5%. Here's the math:
Currently: $100 + $6.50 = $106.50
After: $78 + $23 +$6.50 = $107.50
Okay, so you pay $1 more. I don't especially like it either, but that was to show you that prices won't change drastically, and yes, could actually go down further than 22%.
Now, how do you benefit? Go get your last pay stub. Go ahead, I'll wait. ::twiddling fingers:: hum, hum, hum, da,dee, da, dad, dadde, de..... Oh, you're back...
Okay, look at your paystub. There are three lines we're interested in. FICA regular (Social Security), FICA Medicare, and withholding (what the government uses to run the government). Add those figures up. Got the number? That's how much your pay will go up every paycheck when the FairTax is passed.
Nope. I'm not kidding. It's true. And, I've got another surprise for you. Because Uncle Sam will be getting so much money in revenue from a national sales tax, he'll be able to give you a prebate check each and every month. This will equal the amount your family is expected to pay in sales tax up to the poverty level every month. This amount is based on a formula used by the Feds. It's based on the number of people in your household, not on your income, so if you have another bundle of joy, you'll get more money. This is the only tax reform plan that completely untaxes the poor.
Guess what? shhhh.....you can use that money any way you want. Yep. You can pay off credit car bills, the mortgage, send the kids to college, take that vacation you've been promising your Better Half, invest in the stock market (instead of the food market like you used to have to do), buy a car, or just put it in the bank.
And there's something else you need to know. I mentioned buying a car. If you buy a used car.....you pay no sales tax! Same with a previously lived in house or any other "used" product. If you choose to buy new, yes, you will pay a sales tax. But, shoot, I personally prefer used cars because the problems have been worked out, and they are already cheaper than new. Here's a hint for you about cars: most people can't tell the difference between a current year's model and a car that's a year or two old anyway. So unless you tell people you've bought a used car, they probably won't know.
I've gotten off tract a bit from my original premise: showing you about hidden taxes in everything we buy. I can't say it any clearer. It's seldom that prices go down. When prices do go down, it's because the technology is in place to build things cheaper. But sooner or later, the bottom will be hit and there is no place for prices to go but up. Taxes go up, prices go up. My mortgage goes up every year because my property taxes go up. Property taxes go up because the county has to pay more for everything. When the county has to pay out more, the county commissioners have to find the money somewhere, that usually means property taxes go up.
The FairTax will make it much easier to see the hidden taxes. When you buy an item, say a jacket, the price of the jacket will be on the price tag along with the amount of sales tax. Let's say the jacket costs $75. The price tag will say something like $75 and $23 sales tax total $98. When you go to the register, you will pay $98 plus any state sales tax.
So, the hidden taxes will no longer be hidden. You will see what you are paying and for what.
Okay, I'm gonna do the math for you. There's about 22% in hidden taxes in every item you buy. That's because as the manufacturer purchases the materials to make an item, (s)he has to pay tax on it. When the manufacturer sells to the retailer, those taxes are in the cost. When the retailer sells to you, you are the manufacturer's cost (which includes all the costs of manufacturing the item including any taxes paid) and the tax when the retailer bought from the manufacturer. Business always passes its costs on to the buyer. That's on every item you buy, including, but not limited to a loaf of bread, to a Bic pen, to the car you drive, the house you live in, concert tickets, CD's, iPods, the computer you are reading this on, down to and including your unmentionables.
Here we go:
Let's say an item costs $100 (I've rounded up for the sake of convenience in math, but one penny or five won't make a difference in this lesson). Under the FairTax bill, price will drop (maybe not right away, but very quickly. Trust me, competition will bring prices down) about 22%. No taxes, remember?
$100 x 22% = $22
$100 -$22 = $78
Now we add in the consumption tax. Yes, it will be about 30%. Don't get excited! Bear with me, you'll see that the price won't be that much different from what you are paying now.
$78 x 30% = $23
$78+23 = $101
If you live in a state with a state sales tax like Florida, you will have to pay the state sales tax. You know that can vary depending on the county, but here we pay 6.5%. Here's the math:
Currently: $100 + $6.50 = $106.50
After: $78 + $23 +$6.50 = $107.50
Okay, so you pay $1 more. I don't especially like it either, but that was to show you that prices won't change drastically, and yes, could actually go down further than 22%.
Now, how do you benefit? Go get your last pay stub. Go ahead, I'll wait. ::twiddling fingers:: hum, hum, hum, da,dee, da, dad, dadde, de..... Oh, you're back...
Okay, look at your paystub. There are three lines we're interested in. FICA regular (Social Security), FICA Medicare, and withholding (what the government uses to run the government). Add those figures up. Got the number? That's how much your pay will go up every paycheck when the FairTax is passed.
Nope. I'm not kidding. It's true. And, I've got another surprise for you. Because Uncle Sam will be getting so much money in revenue from a national sales tax, he'll be able to give you a prebate check each and every month. This will equal the amount your family is expected to pay in sales tax up to the poverty level every month. This amount is based on a formula used by the Feds. It's based on the number of people in your household, not on your income, so if you have another bundle of joy, you'll get more money. This is the only tax reform plan that completely untaxes the poor.
Guess what? shhhh.....you can use that money any way you want. Yep. You can pay off credit car bills, the mortgage, send the kids to college, take that vacation you've been promising your Better Half, invest in the stock market (instead of the food market like you used to have to do), buy a car, or just put it in the bank.
And there's something else you need to know. I mentioned buying a car. If you buy a used car.....you pay no sales tax! Same with a previously lived in house or any other "used" product. If you choose to buy new, yes, you will pay a sales tax. But, shoot, I personally prefer used cars because the problems have been worked out, and they are already cheaper than new. Here's a hint for you about cars: most people can't tell the difference between a current year's model and a car that's a year or two old anyway. So unless you tell people you've bought a used car, they probably won't know.
I've gotten off tract a bit from my original premise: showing you about hidden taxes in everything we buy. I can't say it any clearer. It's seldom that prices go down. When prices do go down, it's because the technology is in place to build things cheaper. But sooner or later, the bottom will be hit and there is no place for prices to go but up. Taxes go up, prices go up. My mortgage goes up every year because my property taxes go up. Property taxes go up because the county has to pay more for everything. When the county has to pay out more, the county commissioners have to find the money somewhere, that usually means property taxes go up.
The FairTax will make it much easier to see the hidden taxes. When you buy an item, say a jacket, the price of the jacket will be on the price tag along with the amount of sales tax. Let's say the jacket costs $75. The price tag will say something like $75 and $23 sales tax total $98. When you go to the register, you will pay $98 plus any state sales tax.
So, the hidden taxes will no longer be hidden. You will see what you are paying and for what.
3 comments:
I am a fan of the Fair Tax plan. I agree with most of what your saying except one thing. That is the assumption that the price of things will drop 22%. I dont believe the price will drop any for simple fact that as people we are greedy. The price of an item has the taxes built in to them but who is to say if these companies are going to lower their price because of it or will they just let the price be and enjoy the extra profits? Just for the elimination of the IRS and tax code is enough for me stand behind it. That would save this country a ton of money all on its own.
Hello again RJK!
I understand what you say about people being greedy. I don't dispute that, it's human nature and I have some doubt as to whether prices will really fall.
However, competition should work with greed to make people drop prices if only to get more customers. If we both have two customers and I drop my price, I might get at least one of yours, lifting my profits by a third (?) and yours decrease by half. You then drop your prices and get two of mine.
Some people may be loyal to a brand or a particular store, but others will go where the price is cheaper. That is also human nature.
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