Why the FairTax benefits manufacturing

  • The FairTax plan reduces the cost of American manufacturing considerably. Under the FairTax, American manufactured goods and services no longer enter the marketplace burdened with hidden corporate taxes, the cost of compliance with such taxes, and Social Security employee matching. This amounts to an average cost reduction from 12 percent to in some cases more than 25 percent. Said another way, American goods become 12 to 25 percent more competitive.
  • The FairTax levels the playing field. Under the FairTax, imported goods and domestically produced goods incur the same U.S. tax. This stands in stark contrast to the present system, where U.S. companies and workers must pay income tax and payroll taxes, but foreign goods enter the U.S. entirely free of any tax, other than whatever modest customs duties are levied.
  • Border-adjustable taxes are consumption taxes that are removed/rebated upon the export of goods from producing nations. Such nations reciprocate when importing, assessing incoming goods with ad valorem taxes. Today, 29 of 30 OECD nations have border-adjustable tax regimes; only the U.S does not. By failing to respond, the net effect is the export of both jobs and entire industries.
  • The FairTax brings more and better jobs to the U.S.  Perhaps a more fundamental issue is the overall impact that the FairTax has on the competitiveness of U.S. industry. U.S. businesses are much less likely to locate their plants or corporate headquarters overseas, and foreign companies come to the United States in droves. Americans are employed building these new plants; Americans are employed in the new plants.

Mfg Chart
The share of U.S. GDP derived from manufacturing productivity has dropped substantially since the 1940s. A punitive and unfair federal income tax system that penalizes American manufacturers is a core reason for the loss of this critical base. The FairTax will help reverse this losing trend by bringing jobs, and trillions of dollars of investment capital, back to our shores.