Embedded Service Taxes

Hi Arthur,

I concur with you that there is some language in the bill that is a bit confusing and convoluted. I have forwarded to Congressman Linder's office some suggestions for better understanding of certain sections and noted some errors to them as well. His staff has replied and indicated they will take these under consideration along with Congressman Woodall's additions for the next introduction of the bill to the 112th Congress. I also strongly advise you to read the pamphlet, "An Illustrated Guide To Understanding the FairTax" I developed for the Florida FairTax Educational Association that you can read at: http://www.fairtax.org/site/DocServer/An_Illustrated_Guide_to_the_F... . One note as to services. Today you pay huge embedded taxes for services. In my service business for every $100 I want to put in my pocket, I charge my customers $167. The $67 goes to pay for my share (employee) and the employer share of payroll taxes, 14.21%, plus 25% for the marginal rate income tax bracket this money falls into above my other sources of income. So my embedded tax rate is 40%, well over the misunderstood 22% addressed by Dale Jorgenson and referenced in Boortz and Linder's books. Under the FairTax to put $100 in my pocket, I need only charge my customers $130, interestingly, a 22% savings to them over my current rate. Fortunately for me, I have no financial compliance costs as my wife is a CPA and a former IRS agent, else my embedded taxes would be higher. I cannot dispute there will be those that try to dodge the system, but the system, by design, is better suited to prevent such occurrences, and especially when compared to the system today whereby you can make hundreds of thousands of dollars and pay no income tax and do so legally. I appreciate your strong interest in the FairTax and once you compare it to the alternatives there is only one answer - the FairTax.

Best Regards,
Kerry Bowers
Florida FairTax Educational Association