A more fair taxing structure?
Today's minimum wage earns $15,080 per year gross. Take out $1,154 for FICA (Social Security and Medicare) and $533 for federal taxes, ignore state taxes and the take- home pay is $13,393. If the fair tax is passed, the wage earner will keep the whole $15,080, and depending on the size of the household, will get an additional $2,505 to cover the fair tax on basic necessities, for a total take home pay of $17,585. That is an increase in take-home pay of 31 percent.
The fair tax is a consumption tax the consumer pays when he buys a new good or any service. It is a 23 per cent tax on the wholesale price of new goods and services. Twenty-three percent tax? Yikes. Wait. Businesses build into their prices a 22 percent increase to cover taxes they have to pay for their employees (15.3 FICA, 5.0 withholding, and approximately 2.0 for tax planning and preparation). The 22 percent increase would go away and be replaced by the 23 percent fair tax. You ask why the 22 percent would go away? It is because fair tax requires that the whole federal income tax system be eliminated by repealing the 16th amendment to the Constitution. The fair tax is designed to fund Social Security and Medicare as well as fund the federal government at current income tax levels. We would all pay our federal taxes when we bought a new item or paid for a service. No more April 15 Tax Day.
Used items are not taxed. Just think: rich people who buy fancy new cars, boats and houses would pay 23 percent, drug dealers who deal in cash and avoid the tax system today would have to pay 23 percent on what they buy, visitors to this country would pay 23 percent on all the items they would buy and money parked offshore to avoid our income tax would come back home and be invested in new jobs and projects.
So, which solution sounds better to you? Increase the minimum wage, tax it and squeeze profit margins of all the small businesses which employ people at the minimum wage or pass the fair tax and watch the economy boom?