Compliance costs can be a real economic drag on a small business. They bear a compliance cost burden about 27 times greater than the largest U.S. corporations. They must use different accounting rules to keep track of income, inventories, various types of expenses, depreciation, tax basis for assets sold, various pension and deferred compensation rules, employee benefits rules, etc. The small business must also keep track of payroll taxes, including Social Security, Medicare, and unemployment taxes.
Under the FairTax, small business has a zero tax rate and zero compliance costs. The only thing they have to keep track of is how much did they sell to consumers. Period. It is estimated that business compliance costs will fall by more than 90%.
There would be no more estate tax, which would allow the business owner (or farmer/rancher) to pass their life’s work on to their children without the huge estate tax we talked about earlier (Impact on Farmers & Ranchers)
The FairTax plan increases economic growth, leaving an immediate and powerful impact. The GDP (gross domestic product) would increase by almost 10.5% in the first year. It will raise the economy’s capital stock by 42%, its labor supply by 4%, its output by 12% and its real wage rate by 8%. It also lowers real interest rates by more than one 20-30%.
This in turn will benefit us all in the form of lower prices on goods and services. It will be a win-win situation.