The Fair Tax and Corporate America

Formerly, we saw how the Fair Tax would place every penny of income you earn through hard work in your pocket, and taxes would be collected via a national sales tax on all new goods and services. Now we'll see how the Fair Tax will create an economic atmosphere that will pull back not only all the businesses that have outsourced jobs, but provide incentives for foreign owned business to migrate to the United States.

If you own a business, you will most likely hire some workers. Let's say that after looking over your books, you determine that you can hire a worker, and pay that worker $50,000 while still retaining the same profit margin. No problem and everyone is happy. However, the government charges you for employing that worker. You will pay payroll taxes, Medicaid, Social Security, and unemployment (in the event he decides not to contribute anymore). So, the cost to the employer would become $50,000 plus all of the taxes. That's costs he can't afford. So how does he hire the desperately needed worker? Let's say, for easy math, that all of the mandated taxes on a business with an employee earning $50,000 came out to $8,000, for a total cost to the business of $58,000. Instead, Mr. Business Owner subtracts the $8,000 from the $50,000 the employee should be earning, thereby keeping his profit margins the same and reducing Mr. Employee's wages to $42,000. Here is a complete example of how the current tax system is so punishing to businesses, that it is reducing the earning potential of America's workers. Remove all the punishments associated with employing Americans, like the Fair Tax does, and every worker in America would immediately start earning their full potential! example #1 of how corporations do not pay any taxes!!

Let's say our company manufactures ink pens, and to manufacture one pen we incur expenses that equal $50. To build these pens, we have had to buy certain materials along the way and pay taxes (an average of 22%) correlated to the various phases of manufacture. Now, with our expenses standing at $50, we have paid out all of the taxes along the way. Instead of these taxes reducing our bottom line, we simply add the sum of all of the taxes into the retail price, thereby making the cost of the pen to the consumer $61 and shucking all of our manufacturing tax burden on to you. example #2 of how corporations do not pay taxes!!

It's documented fact that corporations who stay inside our borders spend BILLIONS of dollars each year trying to stay in compliance with the IRS. This is wasted energy and detracts what could be hours spent trying to grow their respective businesses. Instead, what alot of companies are doing, completely legally, is going off-shore to get out from underneath the IRS. Remove that burden, and those companies would come flocking back to the United States. Jobs that were outsourced would flood the market, employing more Americans and multiplying the strength of "local" economies around the nation. In addition to companies that have fled returning, foreign owned companies would invest in building plants and headquarters here, employing the most productive work force in the world. Unemployment would almost be eliminated, excepting those who choose not work anyway, and the purchasing power of the work force would increase.

In the next post, we see what the Fair Tax does to the Government, and those that are inherently hidden from the IRS for tax paying purposes yet still receive benefits from the federal fund.