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Tony Rubolotta
Tax Principles Made Simple
October 5, 2008
The only people who pay taxes in
this country are consumers who make purchases or pay rent from their own
income. Those taxes are paid at the point of purchase and at the time of
purchase. Since the middle class comprises the largest group of
consumers, they pay the greatest share of taxes regardless of the
illusion created by a progressive tax scheme. The wealthy pay more taxes
only to the extent that they may consume more. The truth of these
statements will become self-evident with a few simple illustrations.
That box of corn flakes on your kitchen tables contains every item of
cost it took to bring it from the farmer’s field to your kitchen table,
including any taxes that were levied in that process. Those costs
include the salaries of every person that had anything to do with its
production and delivery, and consequently any taxes they paid on the
income they earned. Every cent of tax paid by the CEOs of the
manufacturer, trucking company, advertising agency, law firm and
accounting firm is included in what you paid for those corn flakes.
Every cent of tax paid for diesel oil, real estate, Social Security,
tires and telephones are in the cost of that box of corn flakes. Every
settlement for a lawsuit, every advertising dollar expended, every
accounting audit and every government regulation is paid for when you
buy that box of corn flakes. Bon appetite!
The same principles apply to the things you rent and the services you
buy. The CEO of any company you buy from may be filing a tax return, but
he is simply a collection point for the taxes you have already paid when
you bought his product, rented his property or engaged his service.
Raising taxes on businesses, corporations or CEOs raises the price of
everything you buy. Anyone reveling in the thought that they are
punishing some rich CEO or forcing him to pay his “fair share” by taking
more of his income through taxes is a fool, because they ultimately pay
his taxes.
The same principles apply to your income. The taxes you pay have already
been paid when the products you make, the property you rent or services
you provide are paid for by the consumer. You are the collection point.
Some American made products and services have become uncompetitive
because of the high cost of taxation and government regulation included
in their price. Government subsidies do not relieve businesses of taxes
so much as they relieve the consumer of the cost of those taxes, making
products and services less expensive to purchase. When those subsidies
are decided on the basis of political connections, it is the government
choosing which businesses may survive and which will fail.
It is government’s insatiable appetite for taxes, regulations and
meddling at every level that has made our businesses uncompetitive. It
is government that drives businesses offshore, leads to outsourcing and
increases the demand for the cheaper labor of illegal aliens. The
collection points for the taxes paid by consumers are disappearing or
moving. As consumers, we are paying taxes to the collection points in
China, Japan, South Korea, India, Malaysia, and every other country that
produces what we once produced for ourselves.
The answer is not to bar foreign products but to make American products
more competitive. Trade is a process by which both sides get something
the other has in exchange for something they don’t have. Both sides
benefit from that process. The differences in the products we trade may
be purely qualitative. If you want cheap light fixtures that break after
a year and burn through light bulbs once a month, buy Chinese. If you
want higher quality light fixtures that last years and don’t burn out
light bulbs on a monthly basis, buy American. But even with that
qualitative difference, if the increased cost of quality has to bear an
excessive burden of taxes and regulation, the product may not sell. If
it doesn’t sell, the business dies and the employees become unemployed.
If you understand and agree on the differences I have described between
the point of payment and point of collection of taxes, you may conclude
that a national sales tax with elimination of the income tax makes more
sense. I would caution however that there is a stench of arrogance in
congress that rivals Caligula on his worst day. While the elimination of
the income tax removes the high burden of compliance placed on the
collection points, I have no doubt there are members of congress that
want to control our lives through the sales tax. The sales tax they
would propose would likely not be uniform, but progressive based on
their idea of what is good for us and what is bad for us, what
businesses have bought them and what businesses they think should be
punished.
I offer my opinion at this time as food for thought. Our government, at
every level, is destroying our economy. Government has inflated the
economy with hand-outs and suicidal regulations that force unsound
business practices in the name of social equality, the environment, or
whatever pet cause d’jour they come up with to enhance their power. We
have seen the result when government encourages people to develop
spending habits equivalent to their own. The bubble that government has
created has burst, but the politicians are still blowing bubbles trying
to convince us it hasn’t. Just remember that the next time you open that
box of corn flakes. |
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