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Monday, March 27, 2006

Illegal Immigration and the FairTax

This article is great to point to many facts. However, one thing that is left out is that the illegal immigrants in this country now do not pay any income tax through their "under the table" wages. Therefore, if we enact the FairTax, they will be able to pay for the services that are being redistributed to them, already.

March 27, 2006
Illegal Immigration and the Fair Tax
By: Marcus Everett

With all the debate going on about what to do about illegals who have invaded this country by the millions, no one seems to have addressed the connection between the illegal worker problem and our tax laws. Whereas most Americans agree that something drastic must be done to secure our borders from terrorist threats, there is considerable disagreement about how to solve the problem of illegals who are here only to find gainful employment. This debate is further fueled by the claim that these illegals are necessary to do jobs that Americans are unwilling to do, and therefore are necessary to the economic health of the U.S.

What seems missing in the ongoing discussions of all this is the role our tax system plays in the matter. The current U.S. tax system is centered primarily around the income tax, which is a significant factor in making the U.S. citizen or even the legal immigrant at a distinct disadvantage to the undocumented illegal worker. I haven't seen an analysis as to how much more a documented legal employee costs a company than an undocumented cash worker, but I would guess it is at least double. Not only does the employee have to get a higher wage to cover his income tax, but the employer is hit with payroll taxes, health benefits costs, union labor costs and the administrative costs of compliance with all of these. This burden prices the American worker out of the picture, whether or not he is willing to do the more menial jobs.

Any careful analysis of the problem points to the income tax as the major culprit. Compliance requires draconian measures by the tyrrannical IRS, and as has been pointed out just recently, there is still a hugh hole in the bucket. Add to this the fact that the income tax does put the U.S. worker at a decided disadvantage to not only the illegal immigrant, but to most of the foreign workers in third world countries, and one can see why outsourcing and moving company production facilities offshore is so rampant. American worker productivity may still be better than most foreign competitors, but in the global market that advantage is offset by the tax burden.

The obvious answer to all this is a consumption tax in lieu of the income tax. NOT a flat tax, nor a combination of income and consumption taxes, but a complete rejection of the income tax as an acceptable mechanism for funding government. And, as the title of this tirade implies, there is a movement gathering momentum to do just that. Google 'Fair Tax' and do your homework. And in the process, consider how much the illegal immigrant worker problem would be improved if the American worker could compete with them on a more equal footing.

Copyright (c) 2006 Marcus EverettP. O. Box 33Looneyville, WV 25259


Anonymous Anonymous said...

Gov. Huckabee's advocacy of the FairTax is the single most important policy position in this election. Research findings explain why:

The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars – $358 billion more than the taxes it replaces [BHKPT].

The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan [THBP].

Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case [THBNP].

The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be [ALM].

Consumption benefits [ALM]:

• Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10.

• Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place.

• The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted.

• By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent.

Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system [KR].

Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively [JK].

Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax [THBPN].

Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20 [THPDB].

On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base [TBJ].

The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent [WM].

ALERT: Kotlikoff refutes Bruce Bartlett's shabby critiques of the FairTax.

Thursday, February 07, 2008 10:22:00 PM

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