Wednesday, April 8, 2015

The Effect of High Sales Taxes on Small Retailers

The FAIR Tax seeks to replace the income tax with a huge federal sales tax. The FAIR Tax is a 23% inclusive tax. It would be a 30% add on tax. If you are in an area with a 10% sales tax, the sales tax would jump to 40%

Huge sales taxes have a negative impact on small locally owned businesses. The video below was made in 1953 by the motion picture industry about the effects of the 20% federal admission tax.

The taxes collected at theaters was six times the profit of American Theaters. The effect of the tax was that 4500 theaters were forced to close. The closures mainly hit small privately owned theaters. This is a video made by the Motion Picture Industry about the effects of the 20% sales tax on the movie theater industry.

Apparently, before the admission tax, most movie theaters were locally owned by people who were involved in their local communities. The theaters were often used as meeting halls and social centers.

Corporate giants like Walmart are likely to thrive with the FAIRTAX. Such businesses make money by processing money. Small mom and pop shops don't have the clout to make money from banking and they are likely to falter when they are forced to collect a sales tax which is several times larger than their profit margin.

Tax reform should be based on a study of the flow of money through the economy and not simply on bombastic claims by the Boortz's and Huckabee's of the world.

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