Sunday, March 19, 2006
The FairTax Solution to Unfair Tax Breaks
In this Washington Post article, "EU Warns of Sanctions on US Goods", we find another example of the many problems with our complex tax code. The European Union will soon reimpose trade sanctions on the US for tax breaks given to US companies that export products to the EU. Because of the complexity of our tax system and the cost to these companies, they have a competitive disadvantage overseas. To offset this disadvantage somewhat, Congress further complicated the tax code by giving specific tax cuts to these companies. These are the tax cuts the EU has problems with. Here's a response from Americans for Fair Taxation.
Karen Walby, Ph.D., Director of Research for FairTax.org :
"The FairTax would solve this problem. The FairTax is automatically border adjustable because it is a destination principle tax which means that the location of the purchaser determines whether something is taxable. So American produced goods sold to US citizens are taxable, American goods exported to other countries are not. Foreign tourists visiting the US would pay tax on hotels, services, meals, admissions to various attractions, etc. because they are consuming the item in the US.
By repealing the federal income tax system and replacing it with a national retail sales tax, the FairTax would eliminate the federal taxes that are embedded in the cost of goods and services exported overseas. Our foreign competitors have an 18% advantage over American producers because their consumption based taxes (VATs) are adjusted out at the border. The cost of the US federal tax system is not.
As a result, the US tried to adjust for this problem by creating subsidies, which the WTO has found illegal; instead of addressing the real problem – our current tax system."
Karen Walby, Ph.D., Director of Research for FairTax.org :
"The FairTax would solve this problem. The FairTax is automatically border adjustable because it is a destination principle tax which means that the location of the purchaser determines whether something is taxable. So American produced goods sold to US citizens are taxable, American goods exported to other countries are not. Foreign tourists visiting the US would pay tax on hotels, services, meals, admissions to various attractions, etc. because they are consuming the item in the US.
By repealing the federal income tax system and replacing it with a national retail sales tax, the FairTax would eliminate the federal taxes that are embedded in the cost of goods and services exported overseas. Our foreign competitors have an 18% advantage over American producers because their consumption based taxes (VATs) are adjusted out at the border. The cost of the US federal tax system is not.
As a result, the US tried to adjust for this problem by creating subsidies, which the WTO has found illegal; instead of addressing the real problem – our current tax system."
posted by Steve Harris, 8:04 PM
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