Bread, the Kind You Eat and the Kind You Spend
Dear America;
Let me tell you a story about bread, the kind you eat and the kind you spend.
In fields near and far, there are farmers toiling from dawn to dusk. One particular farmer sells his wheat to a granary. For every dollar earned, he sends a penny or two the tax collector.
The granary then sells the wheat to a mill and for every dollar earned; the granary sends a penny or two to the tax collector.
The mill then sells flour to a bakery and for every dollar earned; the mill sends a penny or two to the tax collector.
The bakery bakes bread and then sells it to a market and for every dollar earned; the bakery sends a penny or two to the tax collector.
However, to get the bread to market, the bakery hires a trucker, who charges a fair wage plus a penny or two to send to the tax collector.
Eventually, the original farmer goes to the market and buys a loaf of bread for a dollar. Out of that dollar, the market sends a penny or two to the tax collector. In addition to the corporate income tax, the market must pay payroll taxes out of their own earnings for every employee.
When the market pays the stock boys, they must withhold income and matching payroll taxes, which are sent to the tax collector. To accurately manage all the taxes due, the market must hire book keepers and tax accounts. Part of the dollar for each loaf of bread must cover all of these expenses. The bread costs more because of taxes and inefficient compliance methods.
If we look at the ingredients of bread, we find flour, yeast, and eggs embedded in the recipe. If we look at how bread is made, we see the efforts of the farmer, mill, and bakery embedded. We rarely consider the efforts of truck drivers, the petroleum worker to fuel the trucks, nor the factory workers to build the truck – but efforts of all these workers are embedded in the loaf of bread.
We never think about the taxes embedded in the cost of bread. These taxes amount to an average of 22% of the cost of all the products we buy.
Every transaction conducted along the manufacturing process must be tallied and tax paid. This occurs time and time again for every loaf of bread. Consider all the time spent collecting and paying taxes, a few pennies here and a few pennies there. All products and services cost more because of the taxes and compliance costs embedded in prices.
There must be a simpler way to collect these taxes. In stead of burdening the farmer, mill, baker, and truck driver with the tax collection process, how about having the market collect the tax once, at the point of retail sale. What percentage would the market have to charge to collect the same revenue for the federal government? Economists who helped develop the Fair Tax say that the rate is 23% inclusive.
But wait one minute. We already pay prices that are about 22% higher because of embedded taxes. Would this be a total of 45%? No it wouldn’t. The imbedded taxes will go away and prices will fall. Real prices, with the national consumption tax will be about the same as they are today with the embedded income and payroll taxes.
A simple tax of 23% inclusive would be applied to all products and services at the point of retail sale. This would place an equal yet unfair tax on some consumers. The rights of liberty and justice for all would be severely undermined for those who could not afford the bare necessities of food and housing because of the evenly applied consumption tax.
The current Fair Tax legislation has a solution. Essential spending, defined by the poverty level, would be untaxed. Because this credit is based on essential per person spending, a lump sum rebate method can be used. This tax rebate is called the Family Consumption Allowance (FCA). The FCA would be paid to all legal residents in the US.
Simplification is only one benefit of the Fair Tax. The tax base will be increased to include gray market activities currently evading taxes, thus lowering the burden on the rest of us. Social Security funding will be reformed to help support the program at the current legislated growth rate. Congressional integrity is increased by removing special interest tax legislation lobbing.
These are but a few of the benefits of the Fair Tax reform legislation. Please review other articles in this blog and post your comments and questions. The best selling Fair Tax Book by Radio Show Host Neal Boortz and Congressman John Linder provides an excellent introduction to the economics behind the need for tax reform. Visit the Americans for Fair Taxation website at www.FairTax.org to learn more about what we can do to progress tax reform. The positions of your congressional leaders as well as their addresses can be found at the FairTaxScorecard.com. Write congress with your opinions on the need and method of tax reform.
Sincerely,
Bill Rook
Fair Tax Volunteer and FairTaxScorecard Webmaster.
I formatted this as a letter to congress. View some samples labeled “A Story About Bread.” Bill Nelson, Mel Martinez, and Katherine Harris. Just lookup your congressman’s address and send them a copy. Send a second copy to the district office
Bill — I am trying desperately to find some poll numbers showing the current awareness of the FairTax and current support for it.
I am trying to put together an event that would raise both for a class I am taking but I have to be able to tell the prof where I am starting from.
Any ideas?
Thanks,
John O.
John,
FairTax.org is up to 700,000 members, that is about 1/2% of the voters in the last presidential election. BTW: Nader received only 400,000 votes, se we are at least doing better than that.
We are up to 49 Cosponsors plus Representative Linder in the House. We added two in January and two more in February.
A better place to talk about this would be at http://fairtaxgroups.com/index.php?topic=602.new#new.
I already started a thread, so follow up there.
Thanks Bill. I’ll keep tabs on that thread you started.