Pubdate: Thu, 24 May 2007
Source: Star-Banner, The (Ocala, FL)
Copyright: 2007 The Star-Banner
Author: Daniel Drake


The writer of the letter "No value" (May 17), in supporting the so-
called Fair Tax, really a consumption tax, echoes two major
misconceptions of the consumption tax supporters.

The first is that wage earners will receive 100 percent of their
current gross income. Proponents of this program admitted in Money
magazine many months ago that incomes will decline so that take-home
pay will be the same as it is now. One proponent admitted to this on
his radio program.

The second misconception is that drug dealers, illegal aliens and
foreign visitors will pay more tax than they do now. A drug dealer
declares no income now and pays no income tax. Under the consumption
tax he will declare no income and pay no income tax. Goods and
services he buys will not cost him more than they do now. This is a
fundamental concept of the consumption tax. So he is not paying more
than he is now.

But under the consumption tax, he will get a tax rebate, called a
prebate in the proposed Fair Tax system, and presumably will be
covered by Social Security. He is economically better off and is no
longer violating income tax laws.

Consider foreign visitors. A tourist pays $25 for a T-shirt at Walt
Disney World today and pays the same $25 if the consumption tax is
enacted. The current so-called embedded taxes are replaced by a
consumption tax. If this represents an increase in tax revenue, there
truly is a Magic Kingdom.


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