Embedded Taxes: The Hammer Scenario
01/27/2016Here are a couple of charts to help better understand what causes tax accumulation over the typical production cycle of a product. This example uses the hammer as its vehicle of explanation and shows how income taxes, social security taxes and medicare taxes as labor costs add up and become embedded in the final price charged for a hammer. These embedded taxes are shown in blue on the chart. Also illustrated are the complexities and nonvalue added record keeping required to collect the income taxes and submit them (at a cost to the materials, hammer manufacturer, distributors and sales companies) to the government. Also shown is how much the FairTax would simplify the tax collection system.
