Cumberland Times-News

Opinion

March 1, 2013

FairTax is better deal for the minimum-wage earner

President Obama wants to raise the minimum wage from $7.25 an hour to $9 over the next three years. That’s a 24 percent increase.

A better solution is to pass the FairTax (HR25/S122). Today’s minimum wage earns $15,080 a year. Subtract $1,154 for FICA (Social Security and Medicare at 7.65 percent) and $533 of Federal tax due. Ignoring state income tax, the take home pay is $13,393.

Pass the FairTax and the minimum wage earner brings home the full $15,080. They get an additional $2,505 as a reimbursement for the tax paid on the basic necessities. That’s $17,585 take home — a 31 percent raise in one year!

Yes, the FairTax is a 23 percent national retail sales tax on new goods and services. According to the experts, the price of every U.S. produced product we buy is 22 percent more expensive because companies embed the cost of the tax they pay in the price of their products — thereby passing the cost of corporate tax on to the consumer.

Under the FairTax, the prices for products produced in the U.S. should drop an average of 15 percent — 18 percent at the wholesale level — because the embedded tax is removed. Add back in the 23 percent national retail sales tax and retail prices only go up 5 percent to 8 percent.

So, increase the minimum wage 24 percent over the next three years and hurt small businesses, or pass the FairTax and create millions of new jobs. Which would you choose?

James R. Donnell

Cameron Park, Calif.

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