There's another proposed solution to this problem in the form of tax reform - The Fair Tax proposal.
IANA Tax Expert, but I like how they've completely rethought the tax system from the ground up, with the objective of making the US a tax haven for all parts of the manufacturing process - harvesting raw materials, milling into useful materials, manufacturing into products, transport, and sales.
In a nutshell, there are 'embedded taxes' at every point in the manufacturing chain. Take a simplified semiconductor for example, made of sand, aluminum, and copper:
1. Mine the copper and aluminum, collect the sand (payroll + income + other taxes)
2. Purify it all, mill the copper and aluminum (payroll + income + other taxes)
3. Deliver to fabrication facilities (tax the transport company)
4. Convert sand to silicon wafers, etch the microprocessors into the wafers with the copper and aluminum, package into chips. (more taxes)
5. Transport to OEMs (tax the transport company)
6. Build computers (more taxes)
7. FedEx/UPS to purchaser (more taxes).
The consumer ends up paying multiple embedded taxes in the final cost of the product. The Fair Tax folks estimate that these embedded taxes comprise roughly 22% of the cost of the average product manufactured in the US.
The Fair Tax would instead remove all the embedded taxes and add them in one lump sum to the final product:
1. Mine the copper and aluminum, collect the sand (no tax)
2. Purify it all, mill the copper and aluminum (no tax)
3. Deliver to fabrication facilities (no tax)
4. Convert sand to silicon wafers, etch the microprocessors into the wafers with the copper and aluminum, package into chips. (no tax)
5. Transport to OEMs (no tax)
6. Build computers (no tax)
7. FedEx/UPS to purchaser (no tax).
8. Consumer pays 23% tax (calculated inclusively, 30% calculated exclusively) on the final product.
The final cost to the US consumer is roughly the same, but the incentives are drastically realigned. It becomes much less expensive to make things in the US, and they are only taxed when sold in the US. Products exported overseas would be tax-free to make and sell (except for taxes in the foreign countries).
The concept potentially solves all sorts of problems, from our trade balance to illegal immigrants not paying taxes. Definitely worth reading more about for anyone interested:
IANA Tax Expert, but I like how they've completely rethought the tax system from the ground up, with the objective of making the US a tax haven for all parts of the manufacturing process - harvesting raw materials, milling into useful materials, manufacturing into products, transport, and sales.
In a nutshell, there are 'embedded taxes' at every point in the manufacturing chain. Take a simplified semiconductor for example, made of sand, aluminum, and copper:
1. Mine the copper and aluminum, collect the sand (payroll + income + other taxes)
2. Purify it all, mill the copper and aluminum (payroll + income + other taxes)
3. Deliver to fabrication facilities (tax the transport company)
4. Convert sand to silicon wafers, etch the microprocessors into the wafers with the copper and aluminum, package into chips. (more taxes)
5. Transport to OEMs (tax the transport company)
6. Build computers (more taxes)
7. FedEx/UPS to purchaser (more taxes).
The consumer ends up paying multiple embedded taxes in the final cost of the product. The Fair Tax folks estimate that these embedded taxes comprise roughly 22% of the cost of the average product manufactured in the US.
The Fair Tax would instead remove all the embedded taxes and add them in one lump sum to the final product:
1. Mine the copper and aluminum, collect the sand (no tax)
2. Purify it all, mill the copper and aluminum (no tax)
3. Deliver to fabrication facilities (no tax)
4. Convert sand to silicon wafers, etch the microprocessors into the wafers with the copper and aluminum, package into chips. (no tax)
5. Transport to OEMs (no tax)
6. Build computers (no tax)
7. FedEx/UPS to purchaser (no tax).
8. Consumer pays 23% tax (calculated inclusively, 30% calculated exclusively) on the final product.
The final cost to the US consumer is roughly the same, but the incentives are drastically realigned. It becomes much less expensive to make things in the US, and they are only taxed when sold in the US. Products exported overseas would be tax-free to make and sell (except for taxes in the foreign countries).
The concept potentially solves all sorts of problems, from our trade balance to illegal immigrants not paying taxes. Definitely worth reading more about for anyone interested:
http://www.fairtax.org/
http://www.amazon.com/FairTax-Answering-Critics-Neal-Boortz/...
http://www.amazon.com/FairTax-Solution-Financial-Justice-Ame...