Blue Collar Muse

Critics and proponents of the proposed Fair Tax (HR 25, S 1025) should take note of recent discussions in the State of Tennessee concerning the state’s efforts to enforce its tax laws.

After a recent $.42 per pack tax hike on cigarettes went into effect, the state began receiving complaints from retailers that their business was off as people went to any of 8 adjoining states to buy cigarettes where the taxes were lower. In some cases, much lower. Of course the drop in sales meant a drop in tax revenue as well. And government is just as concerned with its income as any of its citizens.

Tennessee’s response was to ramp up enforcement of the Tennessee Tax Code which makes it a misdemeanor to possess more than 2 cartons of smokes without a Tennessee Tax Stamp and a felony to have over 25 cartons of same. Department of Revenue agents from Tennessee are actively looking for Tennesseans buying large quantities of cigarettes out of state. When they start back home, the agent who spotted them in Kentucky, for example, calls agents back in Tennessee who stop the car once it re-enters Tennessee. The offender can be fined, jailed and even have his vehicle confiscated!

The State of Tennessee recognizes what Fair Tax supporters already know. People will spend their money where the cost is lowest. In Tennessee’s case, smokers drive out of state to save on taxes. In the case of Federal income, people and governments all over the world will invest their money here because of favorable tax treatment once The Fair Tax becomes law. In addition, money, jobs and investments currently outside the US and controlled by US citizens and companies will come back home when the high taxes that drove them out in the first place are done away with.

Opponents of The Fair Tax can argue all they like that there is no guarantee of an investment boom in our nation once The Fair Tax is implemented. But if some good ol’ boys with a bad habit down in Tennessee have the sense to head to where the taxes are lowest, it seems a pretty fair bet that smart, savvy investors and managers will do the same.

Thinking maybe “Less is More” is really true after all …

Blue Collar Muse

SEE ALSO:

FAQ: How Can We Be Sure Prices Will Fall? at Rep Linder’s Fair Tax site
Taxes and the Increase in Families Going Bankrupt at The Fair Tax Blog

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