Fair Tax Nation

Replace All Federal Taxes on Income with the Fair Tax Act , HR 25

Thoughts on class warfare from a segment I heard on the Michael Medved show...

On my way to pick up my son from preschool, I heard a segment on the Michael Medved show where the caller was really tweeked that he got paid $8/hour for caring for the elderly while the auto workers were making $75/hr (probably inclusive of union dues - I just don't know).

He indicated that one way out of the economic problem is to raise the pay at the lower rungs which would put more money in the pockets of the less fortunate to help them pay their mortgages, etc. He wanted to be paid $75/hr for caring for the elderly. This is fine but... in order for this to happen AND for his employer to make a reasonable profit the employer would have to bill out his time at $150/hr. Are the elderly expected to pay this? If not, who?

Part of his argument was that executive management and business owners make millions but he is stuck making $8/hr.

It occurs to me that part of the reason that there may be such a wide gap between what business owners make and what line workers make is that the obstacles to start up a competing business are too great. Any business - big or small - has to have all of their compliance ducks in a row just to operate. These include complex accounting, HR, Income Tax withholding, Payroll Tax Withholding, etc., etc. If these huge obstacles weren't in place, a dissatisfied worker could hang his shingle in the next town and offer his services / products elsewhere.

I heard the term "too big to fail" too many times recently. Level the playing field and we will have no "too big to fail" enterprise organizations and plenty of "if I don't operate efficiently and provide excellent products/services I am going to fail" mid and small-sized organizations.

The FairTax removes these obstacles that alter the free market and allow gross pay inequities as well as enterprise organizations that are "too big to fail". Don't get me wrong... I don't care if one person makes a ton of money... more power to him. That means that he is doing plenty of things right. I would just like that to happen in a true free market system. The FairTax promotes a true free-market system.



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Comment by Art Villa - Global Perspective on January 26, 2009 at 12:00pm
Excellent comments Peter. I own a small business and can appreciate the sweat equity and risk involved. Thanks for sharing this perspective!

Comment by Peter D. on January 26, 2009 at 11:27am
Good post! One thing I like to point out to people is this: it takes a LOT to start and run a business that can afford to employ ANYONE other than the owner. Let's not start with compliance and accounting costs... let's start at the begininng with things like risk tolerance, work ethic, singular focus, the ability to raise funds, business acumen/experience.... Very few of these items are learned traits. Most of them are intrinsic to a person's personality type.

The same can be said for most executives when compared to most line workers. For example... My father has been an hourly worker his entire life. When I became an executive with my company and was asked to relocate for a merger/acquisition integration, his first statement was "You better be getting a raise out of it!" My initial thought was "Wow! I really get to help build this business."

Two years later I was given a large bonus - far more than I would have ever receivedas a rasie using my father's mentality - and the option to reinvest some or all of it back in the business to become part owner. I invested and now own a chunk of the business. If the business does well, I'll be one of those reviled "highly paid" executives. If the business does not do well, I'll be out a LOT of money.

This story is the exact reason for the difference in pay. It takes a lot more to be a VP or CEO than it does to be a $10/hr forklift operator. Some people have it. Some don't. Some have it and don't want the pressures that come with a high-power job. Others don't have the skill/ability but have the desire. Does that make compensation unfair? No... Unless you want to say that I did not fulfill my dream of becoming a rock star because "{the system" set me up to fail. Unfortunately, I was blessed with incredible ambition and a great work ethic, but very little vocal talent. :)
Comment by Jim Tomasik on January 13, 2009 at 6:42pm
Good Blog, Art!

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