Monday, August 29, 2005

On Gas Prices And Income Taxes

You are probably getting several emails urging a citizen revolt against higher gas prices.

You know the routine: if we all boycott the same company or all swear off gasoline for one day, the oil companies will get the message. What these would-be Crusaders are missing is that we can run our gas guzzlers on fumes all week and blow the whole thing walking to the grocery store and spending $100 on food. In short, we can all cut up our Chevron cards in protest if we want to. The shippers who bring the goods we buy will not participate. The statement is muted as soon as we buy an apple.

It isn't a giant leap from the realization that gasoline consumption plays a role in the availability (and the price) of everything from Cheerios to chaise lounges to the screaming need for federal income tax reform.

It stands to reason that three dollars a gallon for gas -- which now seems inevitable and imminent -- will not only eat into your take home pay, but will take a bite out of shippers' and truckers' bottom lines as well. So if your kiwis come from Chile, you can probably expect the price of them to be headed north as well.

Did it ever occur to you that when your favorite plumber's growing business puts him in a higher tax bracket, the same dynamic applies? And that is for a service, which isn't taxed directly at the retail level.

A "flat tax" doesn't begin to address the issue of income taxes passed along from providers to consumers. Only the Fair Tax does that. Congress goes back into session in one week and tax reform will be on the agenda. Done properly, this reform could have an enormously positive impact on the U.S. economy.

Every Economics 101 textbook refers to a "multiplier effect" that ripples through an economy as the result of certain actions. Just as gasoline price increases reverberate through layers of providers and get passed along to consumers, nearly one-third of the price of all goods and services flows back to the federal government to pay income tax liabilities incurred by those same providers. The difference is that we can actually have a meaningful impact on income taxes.

We need the Fair Tax now. If you want to affect change, join this Crusade (with apologies to our Islamo-fascist readers, of course.)