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Could it be possible for the U.S. auto industry to survive the demise of the 3 Detroit automakers, and possibly even come out ahead? What if, in the wake of these automakers shutting down, a new industry based on the obviously profitable examples of foreign automakers in America were allowed to emerge? What if these new companies weren't located in Michigan and constrained to hire UAW workers? What if, as demonstrated in Ohio, carmakers opted for non-unionized labor states that could make it profitable to build cars? Wouldn't we be better off?
Ok, this wasn't supposed to be about the automakers, or the union, although I'm plenty pissed off about both. This was supposed to be about the FairTax.
Supposing these same automakers (sans unions) did not pay corporate tax, payroll tax, or (as the case with proposed VAT tax plans) sales tax on each stage of the production process? Would this make them more profitable? Would they be able to make better choices on how to spend their profits? Would they be able to hire MORE workers without the burden of matching payroll tax rates for their employees?
I've done some study on this topic, and I will probably write a post about my take on the fairtax at a later date, although you can study it at www.fairtax.org. The primary reason for this post is to put forth the idea that we quite possibly wouldn't have to bail out failing corporations if they weren't taxed to death, or if the cost of doing business in the U.S. wasn't quite so high.
What if the government didn't have quite such a firm hold on tax revenue, and it was more visibly in the hand of the taxpayers? Would we then have more say in whether or not to bail?
What do you think?
2 comments:
I get your point, but the problem with the auto makers is that they ran their business into the ground and the unions sucked them dry the whole time they were doing it. I don't think a different tax policy would change their decisions. Even with the fair tax you will have well run businesses and poorly run businesses.
With the FairTax... Marketing, R&D, Engineering, and other front-end investment would not be taxed. Companies could really focus in these areas and on customer services without the government having their hand in the pocket every step of the way.
Companies are simply less agile with the current system. There are extreme capital expenditure decisions that must be made because of depreciation rules, etc. There is little room for error with Marketing and R&D... because of the shear capital expenditure involved with setting up the assembly lines.
If a company is less agile and can't adjust to less-than-ideal marketing decisions, it is hard to recover - especially with all of the safety nets that the unions have.
With the FairTax, businesses would have much more agility since the government only gets its share on sales at the retail level. Capital expenditures no longer are an extreme tax consideration. Companies don't take a payroll tax hit on Marketing, R&D, Engineering, etc. Companies can simply be more agile (and more competitive).
There is so much more to the FairTax but this got longer than I wanted...
Cheers,
Art
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