Wednesday, October 17, 2007

THE IMPACT OF THE FAIRTAX ON INVESTMENT

Our present income tax system is a real downer when it comes to savings and investments, through double, triple, and even quadruple taxation. You get taxed when you earn the money (wages). Then, if you save or invest some of your money, you get taxed again and again. 100% of your income from investments is taxed (up to 80% if Nancy Pelosi has her way, leaving you a measly 20%). You have to pay capital gains taxes if you sell it for more than it was purchased.

Corporate income (including capital gains) is taxed at the corporate level and again when it is paid to shareholders as dividends. And on and on, until, when you die, the estate and gift tax may kick in for one final tax blow.

With the FairTax, the following is true. I copied it directly from the FAQ on the Fairtax website:

"What happens to the stock market, mutual funds, and retirement funds? Investors prosper greatly under this plan, since corporations face lower operating costs and individuals have more money to save and invest. The reform significantly enhances the retirement savings and/or retirement spending power of most Americans. The purchase of stocks is considered a purchase for investment purposes and not personal consumption so they are purchased tax free. The service fees charged by the broker, however, are personal consumption and therefore subject to tax. "

After the repeal of the income tax and the enactment of the FairTax, the U.S. will probably be the most attractive place on earth to invest. We will attract investment capital from around the world to finance new plants and create jobs here in America. American workers will build these plants, build the equipment installed in these plants and will be employed in these plants. Off-shore money will find its way back home and our economy will be booming like never before.

And you can laugh all the way to the bank!

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