While Congress is debating various health care reform proposals and the funding through the current Income Tax system, I started to think about what will happen when the Fair Tax is passed!
The current proposals are set up to “tax the wealthy” , tax the more expensive insurance plans (people who are wealthy can afford them) and charge a tax on the expensive (over $100) items and procedures. What Congress does not realize is that all these higher costs on the wealthy and higher income earners will be passed down to the customers of the wealthy (business owners) which means everything we buy will cost more money and the average American will pay these costs.
Once the Fair Tax passes, this will be eliminated. The vast majority of the taxes created to cover the health care costs are tied to income levels in one form or another. They are part of the Income Tax Code. It will all be eliminated! The Fair Tax percentage will be recalculated to reflect the higher cost of operations of the Federal Government. How much higher will this make the Fair Tax?
I am not an economist or even a math scholar, but let me suggest some basic facts that have been illustrated in many media discussions.
Before any reforms become effective the health care costs are about one twelve of the economy. Projections are that these costs will double and have the government in control of one sixth of the overall economy. The Fair Tax is designed to be revenue neutral and not change any of the spending side of the federal government. It does not matter (for this discussion) what is covered by the reform, who gets the coverage or if it is a private or governmental operation. This discussion is the revenue side of the equation.
The proposed Fair Tax rate is 23%. This also represents the Federal revenue under current day tax rate compared to the GNP. (Revenue Neutral) Therefore the health care would be approximately 2% of the total. Since the recommended changes would double the costs of health care, we should be able to say that the increased Fair Tax rate would go up to 25% or a little higher.
That is until the Congress wants to get their hands into the pot and want to reward their friend. However, since the Fair Tax will apply to everyone that spends money in the Country, there will be too many eyes on them and they still will want to get reelected.
If there are any others out there that have any ideas or thoughts about this, please post them. A few people have asked this question at some of our events and I would like to hear others opinions.