Fair is fair
I have a lot of friends who are very "high" on the Fair Tax proposal. After reading about the sucesses in Estonia, I might become a convert.
"Twelve years ago, Estonia became the first country to tax everyone -- companies and individuals -- at the same flat rate. It started at 26 percent, dropped to 22, and will go to 20 in 2009. There are a few deductions for things like mortgage interest, educational expenses, and charitable donations. Very low incomes are exempt.
Unsurprisingly, Estonia is booming. The former Soviet republic used to be poor, with an average income 65 percent below its European neighbors. Today, Estonians are almost as rich as their neighbors, and their economy is growing more than 11 percent a year.
Corporations like a tax system that is low and simple, too, and that leads them to do more business in flat-tax countries. American companies such as Microsoft, Colgate, 3M, Bristol-Meyers Squibb, and Johnson & Johnson opened businesses in Estonia after the flat tax was adopted. Twelve years ago, foreign investment in Estonia made up only 5 percent of GDP, but today, it's up to 20 percent. That means there's more money in the Estonian economy to tax. So while the tax rate dropped, government revenues actually increased. "
To all of you who think that corporations will stay in Minnesota once the top tax rate is raised, take a look at that list again. Recognize the one between Colgate and Bristol-Meyers Squibb? Yes - Minnesota's own 3M Corporation! How long do you think it will take for the corporate office to move to a more tax friendly country should our tax rates here go up again? Anyone?????
"Twelve years ago, Estonia became the first country to tax everyone -- companies and individuals -- at the same flat rate. It started at 26 percent, dropped to 22, and will go to 20 in 2009. There are a few deductions for things like mortgage interest, educational expenses, and charitable donations. Very low incomes are exempt.
Unsurprisingly, Estonia is booming. The former Soviet republic used to be poor, with an average income 65 percent below its European neighbors. Today, Estonians are almost as rich as their neighbors, and their economy is growing more than 11 percent a year.
Corporations like a tax system that is low and simple, too, and that leads them to do more business in flat-tax countries. American companies such as Microsoft, Colgate, 3M, Bristol-Meyers Squibb, and Johnson & Johnson opened businesses in Estonia after the flat tax was adopted. Twelve years ago, foreign investment in Estonia made up only 5 percent of GDP, but today, it's up to 20 percent. That means there's more money in the Estonian economy to tax. So while the tax rate dropped, government revenues actually increased. "
To all of you who think that corporations will stay in Minnesota once the top tax rate is raised, take a look at that list again. Recognize the one between Colgate and Bristol-Meyers Squibb? Yes - Minnesota's own 3M Corporation! How long do you think it will take for the corporate office to move to a more tax friendly country should our tax rates here go up again? Anyone?????
Labels: Tax Relief
posted by The Lady Logician at
9:07 PM
1 Comments:
Yes, the flat tax is an excellent start. It would save some portion of the current $400 BILLION this country spends every year, just on compliance, (you still have to define and track "income") not to mention the terrible economic distortions to the economy it creates.
But if you really want a no-brainer, you'll push for the Fair Tax-- sometimes known as the national (retail) sales tax, or a "consumption tax." Some of the benefits are:
-the IRS disappears, along with all compliance costs and economic distortions.
-It gets rid of the income tax, corporate tax, gift tax, estate tax, AND Social Security taxes, yet is "revenue neutral" to the government. Everybody's paycheck suddenly gets bigger-- no withholding.
-It is "price neutral" to the consumer. All the hidden taxes are removed from the price, and the tax explicitly added back on. You know the true price of government.
-It gives an immediate 23% drop in the cost of our exports, and a 23% increase in the cost of imports. How's THAT for a "balance of trade" improvement?
-Every savings account or investment becomes a "super" IRA. No taxes until you spend the money, and money goes IN tax-free. Coupled with the bigger paychecks, expect a lot more savings and capital investment, and a booming economy.
-It is FAIR in a way that the IRS code cannot possibly be, since everyone pays the exact same percentage of what they spend. It is even more fair since it collects taxes from drug dealers and from other people who now "hide" their money from the IRS, legally or illegally. It also collects money from those who are already wealthy and who have little "taxable income," but spend a lot, like the Kennedys.
-It is also a perfectly "progressive" tax because of the "prebate." Everybody is exempt from taxes-- you get a refund-- up to the poverty level. So the person just above the poverty level pays a very small percentage in total taxes (unlike the highly regressive Social Security tax they now pay), while the high rollers pay almost the full 23%. And isn't that what makes us want to "punish the rich" anyway, their high living? The guy next door, plowing everything he earns back into his business, pays only the tax that supports his current lifestyle.
Mind you, the liberals so uber-concerned about "tax fairness" want nothing to do with this, because they cannot "social engineer" through the tax code. Otherwise, it's a no-brainer.
But "no corporate tax" is another big boon to the economy. Since corporations pay no taxes anyway, they just pass them on to their customers, they could concentrate on their actual business, and make investments based on what was good for that business (like other countries do) rather than "needing the tax break."
J. Ewing
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Anonymous, at 9:31 AM
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