This is a response to the Fairtax Spokesmen Explain Their Hidden Tax blog that acts like it is exposing a trillion dollar hidden tax. The blogger, "Seeker", recently commented on one of my posts. That tax is referring to the fact that all governing bodies(federal, state and local governments) are not exempt from the FairTax. That means merchants and contractors will have to collect the tax for goods and services provided to state and local governments. I never intended to hide or deny this fact. So, for really full disclosure, non-profits are also not exempt.
Under the FairTax, government contractors would be exempt from the FairTax. Not only that, but they nor any other business would have to pay income taxes or federal payroll taxes (social security, medicare, federal unemployment taxes). This allows businesses to price their goods and services more competitively, especially when bidding in government competitive bid contracts. In fact, research while developing and drafting the FairTax proposal found that 22% of the prices we pay for goods and services go towards taxes that manufacturers, distributors, and retailers have already paid to bring the products to market.
Now, I doubt that the contractors would be able to lower their bids by 22% if the FairTax was in effect; therefore, the governing bodies may end up paying more under the FairTax. That, though, could be a good thing if it forces those governing bodies to be more careful spending OUR money.
One thing that the blogger, who used the name “Seeker”, failed to mention was that even governments would not have to pay payroll taxes (social security, medicare, federal unemployment taxes) on wages that they pay to its employees. For most governing bodies, wages are a major part of their budgets. So, this will provide some relief for governing bodies.
There some are parts of the FairTax that I don’t like, and there are other parts that others don’t like. I know one part that Seeker doesn’t like. All in all, though, I like the FairTax and still support it.