Quote:
Originally posted by Lane
correct me if i'm wrong, as i dont claim to be an expert on this..
here is my simpleminded reasoning:
income tax encourages you to spend more on business expenses rather than personal expenses.. causing more investment.. basically investments cost less than luxury.. employee payrolls are also included in these business expenses, so they cost less too, encouraging you to employ more people..
on the other hand, higher sales tax will discourage consumption and the demand on products.. demand is what drives the production, which brings the main income of the corporations who pay all the people in the first place.. lower consumption would cause a chain reaction towards making people poorer..
anything wrong with this logic?
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Yes, according to the fairtax proposal, business expenses are not taxable. The same motivation to spend on business holds true.