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Which would you choose?

web posted February 26, 2013

Dear Editor:
President Obama wants to raise the minimum wage from $7.25 to $9.00 over the next three years. That's a 24% 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%) 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% raise in one year!  

Yes, the FairTax is a 23% national retail sales tax on new goods and services.

According to the experts, the price of every US produced product we buy is 22% 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%-18% at the wholesale level because the embedded tax is removed.  Add back in the 23% national retail sales tax and retail prices only go up 5% to 8%.

So, increase the minimum wage 24% 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, CA

Editor's note: Removing the embedded 22% tax from products and then adding back in the 23% sales tax would equal a 1% increase in pricing at origination.

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