There are many unfair and even damaging things about the American tax laws that get very little, if any attention. For example, there is an enormous underground economy in which people do not pay any taxes. Millions of people work "off the books" and pay no taxes while others with the same income and who obey the law pay all manner of taxes. In addition, the very structure of the tax laws actually penalizes American companies and promotes their foreign competitors who do business here. An American company that sells one of its products for $1000 must pay taxes at a rate of 35% on the profits it earns from that sale, while a Canadian company that makes its products in Ontario and then sells it to a trading firm that ships it to the USA only ends up paying American taxes on the portion of the profits earned here; the rest of the profit is taxed at the much lower rate in Canada. If each sale generates an overall profit of $300, the American company gets to keep about $195 while the Canadian company gets to keep $230. If you were a company planning to open a new plant, in which of those two countries would you locate?
Just these two problems with the tax law cause enormous problems for the country. First of all, the tax structure sends American jobs out of the country. Second, literally hundreds of billions of dollars of tax revenue is lost to the government; these are the funds that could close the budget gap that seems inevitable in Washington. Third, the burden of funding the government is placed unfairly on those who pay their taxes. Fourth, the tax code provides an incentive for businesses to hire illegal aliens for jobs instead of American citizens since the illegal aliens cost less since there are no taxes involved.
Let's stop for a moment to consider this last point. If a construction contractor is looking to hire five laborers for a project, it has two choices: it can hire American citizens or it can hire illegal aliens to work off the books. When the contractor hires a citizen, it has to pay all sorts of tax costs on top of the wages paid to the worker. For example, the contractor has to pay the employer portion of Social Security and Medicare taxes which, by themselves, raise the cost of the American worker by ten percent. Further, the illegal aliens are not paying taxes themselves, so the contractor can pay them less and they still get the same take home pay. There are other factors at work, but the taxes alone make illegals something like 20-25% less expensive than American workers.
There is a remedy for these problems with the tax code: switching to a national sales tax. Consumer sale across the country would be taxed at a rate of something like 6% that would go to the federal government. There would be an exemption for food and inexpensive clothing and some other mechanism to refund or adjust the taxes to those who file tax returns so as to remove much of the burden from the poor. With the passage of the sales tax, the rates for corporate income taxes as well as those for the payroll taxes like Social Security would be lowered. Think what that would do.
1. Taxes on products made in the USA and those made abroad would be the same while the tax on the profits of American businesses would be lowered. That would reduce the advantage that the tax code gives to foreign goods and it would promote the creation of millions more American jobs.
2. People who make their living from criminal activities would have to pay the sales tax. The drug dealer who now pays no tax would suddenly begin contributing tax revenue. This could add tens of billions of dollars to the treasury.
3. The changes to the tax structure would reduce the cost differential between hiring American workers or hiring illegal aliens off the books. Here too, in the aggregate, this would mean more jobs for American workers.
4. The lowered corporate income tax rate would make the USA a more attractive place for foreign companies to locate their facilities. More such investment in the country means more jobs.
In short, the change would mean more jobs, more fairness and more tax revenue.
Just these two problems with the tax law cause enormous problems for the country. First of all, the tax structure sends American jobs out of the country. Second, literally hundreds of billions of dollars of tax revenue is lost to the government; these are the funds that could close the budget gap that seems inevitable in Washington. Third, the burden of funding the government is placed unfairly on those who pay their taxes. Fourth, the tax code provides an incentive for businesses to hire illegal aliens for jobs instead of American citizens since the illegal aliens cost less since there are no taxes involved.
Let's stop for a moment to consider this last point. If a construction contractor is looking to hire five laborers for a project, it has two choices: it can hire American citizens or it can hire illegal aliens to work off the books. When the contractor hires a citizen, it has to pay all sorts of tax costs on top of the wages paid to the worker. For example, the contractor has to pay the employer portion of Social Security and Medicare taxes which, by themselves, raise the cost of the American worker by ten percent. Further, the illegal aliens are not paying taxes themselves, so the contractor can pay them less and they still get the same take home pay. There are other factors at work, but the taxes alone make illegals something like 20-25% less expensive than American workers.
There is a remedy for these problems with the tax code: switching to a national sales tax. Consumer sale across the country would be taxed at a rate of something like 6% that would go to the federal government. There would be an exemption for food and inexpensive clothing and some other mechanism to refund or adjust the taxes to those who file tax returns so as to remove much of the burden from the poor. With the passage of the sales tax, the rates for corporate income taxes as well as those for the payroll taxes like Social Security would be lowered. Think what that would do.
1. Taxes on products made in the USA and those made abroad would be the same while the tax on the profits of American businesses would be lowered. That would reduce the advantage that the tax code gives to foreign goods and it would promote the creation of millions more American jobs.
2. People who make their living from criminal activities would have to pay the sales tax. The drug dealer who now pays no tax would suddenly begin contributing tax revenue. This could add tens of billions of dollars to the treasury.
3. The changes to the tax structure would reduce the cost differential between hiring American workers or hiring illegal aliens off the books. Here too, in the aggregate, this would mean more jobs for American workers.
4. The lowered corporate income tax rate would make the USA a more attractive place for foreign companies to locate their facilities. More such investment in the country means more jobs.
In short, the change would mean more jobs, more fairness and more tax revenue.
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