LABOR DAY
Wallpapers.com
Today is Labor Day, and we FAIRtax supporters need armor against false attacks that the FAIRtax is unfair to laborers.
Today we commemorate the contribution of laborers, who built this country. Many of us have the day off and enjoy one last picnic or day at the beach or the lake before vacations end, and kids go back to school. Today serves as a counterweight to the Day of Labor on May 1, which has more militant roots elsewhere in the world, and not just in socialist countries. In contrast to socialist emphasis on class struggle, many laborers in our country have moved into the middle class.
The trope you hear from certain corners about Labor Day and the FAIRtax is that the FAIRtax punishes laborers because workers shoulder most of the burden of sales taxes. Workers typically earn less than managers and professionals and consume a larger part of their income. Thus, critics argue, it would be unfair to laborers to tax consumption while allowing the top 1% of earners, who save larger portions of their income, to escape taxation.
That argument has appeal and might have merit if there were no adjustments to the FAIRtax. The first adjustment the FAIRtax makes for laborers is to eliminate payroll deductions from laborers’ paychecks for income tax, Social Security, and Medicare. The top 1% do not get those breaks because they live largely off investment income. If the FAIRtax causes retail prices to rise, laborers will have more take-home pay to cover those prices and, most likely, some pay left over.
By featuring the family consumption allowance, or prebate, the FAIRtax addresses another argument that it disproportionately affects laborers. The critics argue that, if a single mom on SNAP pays the same tax on the same cart of groceries as Elon Musk, the impact on the SNAP mom is far greater. Without more, that is true.
Fortunately, the FAIRtax provides that even though each lawful resident of the United States pays the full tax at the cash register, they receive an advance refund of the tax on essentials. The effect is that, up to the poverty level, no lawful resident, including laborers and the SNAP mom, pays tax. Above that level, everyone pays tax at the same rate on consumption, which is largely discretionary.
The FAIRtax un-taxes the pre-tax cost of producing goods and delivering services, which should counteract the new tax for laborers. Critics argue that retail prices tend to be sticky, and lower production costs will not immediately be reflected in lower retail prices.
It is true that the FAIRtax does not control price levels by fiat. However, in a market where production is competitive and demand is elastic, producers and providers will quickly lower prices when their costs fall.
Economists call the effect of taxes on the well-being of different income and wealth groups a distributional analysis. Distributional analyses go beyond just taxes and income. Income, some economists say, is a poor measure of well-being. Consumption, which the FAIRtax charges, is a better measurement.
Why? When people with higher incomes save, they defer personal gratification and the utility of that income, investing it instead. While that income is saved rather than spent, savers, such as the 1%, temporarily experience a lower standard of living than their income would suggest. Others, for a fee, use their saved income until the owner decides they need it back.
When businesses use that income, they hire more laborers or make the laborers they have more productive, paying them higher wages. Clearly, when we use consumption as a measure of well-being, laborers come closer to the 1% than when we measure the difference by income.
For sure, the FAIRtax is good for laborers, for whom we set this day aside. So, enjoy your barbecues, sports, day at the beach or lake, and help pass the FAIRtax. I would love to hear from you if you have a compelling Labor Day story that shows how the FAIRtax would benefit labor.
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