« Previous — Next »
Abolish the Incomes Taxes (IV): The Fair Tax
26 September 2007The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality.
The income tax is holding us back and making it more difficult than it needs to be to improve our families’ standard of living. It makes it needlessly difficult for our businesses to compete in international markets. It wastes vast resources on complying with needless paperwork. We can do better and we must.
Is the FairTax fair?
Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.
The Fair Tax rewards, not punishes like our current system.
I wrote in the title the plural of income and tax deliberately. With our current system of taxation we pay taxes on our multiple sources of income earned and un-earned and we pay taxes on monies that we have already paid taxes on. Taxes on taxes.
The Fair Tax is a 23% sales tax on all items we purchase. An item only gets taxed ONCE. Sell a used car and pay NO taxes on it. Why should we have to pay taxes twice on the same item?
I didn’t dream this up, there is a national organization behind this, FairTax.org . And Laura Ingraham pushes it in her new book, “Power to the People”.
For the Presidental Candidate Scorecard click here. Oh by the way, none of our elected public servants at the Federal level, both Congress and Senate support the FairTax. Huh, go figure.
The axioms of taxation have never changed and never will.
• Only people pay taxes. See post II if you need help on this.
• Consumption taxes are the oldest form of taxation for many good reasons.
• Consumption tax rates are self-limiting.
• Consumption taxes, throughout history, have enhanced civil liberties and more.
• Direct taxes (income taxes/poll taxes/head taxes), throughout history, have been the tools of tyranny.
• Uniformity of taxation wards off special interest manipulation. (But what will the 37,000 lobbyists in Washington DC do?)The FairTax:
- Abolishes the IRS and the cost of running it
- Restores Privacy
- Eliminates the $500 billion dollar cost of preparing taxes
- Closes all loopholes and brings fairness to taxation
- Ensures Social Security and Medicare funding (wider tax base and more stable)
- Brings transparency and accountability to tax policy
- Allows American products to compete fairly
- Reimburses the tax on purchases of basic necessities
- Enables retirees to keep their entire pension
- Enables workers to keep their entire paycheck
- Restores the incentive to work
- Lets YOU better control your finances, not the government
- Rewards saving
- Rewards retirement savings
Americans under certain income levels get a “prebate” which is a check every month which covers the future month. This prebate is intended to cover the requirements of life such as food, the prebate “untaxes” the lower income earners.
Because of the rebate (or prebate, since the check is sent each month in advance of expenditures), people at or below the poverty level pay no federal taxes. This is why we say the FairTax untaxes the poor. But all American taxpayers will benefit from this, including seniors on fixed incomes and young people just starting out. As the chart shows, a couple will pay no federal taxes on the first $20,420 they spend.
The FairTax leaves more money in more taxpayers’ pockets.
If it leaves more money in the taxpayers’ pockets how can it be revenue netural?
The proper tax rate has been carefully worked out; 23 percent does the job of: (1) raising the same amount of federal funds as are raised by the current system, (2) paying the universal rebate, and (3) paying the collection fees to retailers and state governments. Unlike some other proposals, this rate has been independently confirmed by several different, nonpartisan institutions across the country. Detailed calculations are available from FairTax.org.
How is the Social Security system affected?
Like all federal spending programs, Social Security operates exactly as it does today, except that its funds come from a broad, progressive sales tax, rather than a narrow, regressive payroll tax. Employers continue to report wages for each employee, though, to the Social Security Administration for the determination of benefits. The transition to a reformed Social Security system is eased while ensuring there is sufficient funding to continue promised benefits.
Meanwhile, Social Security/Medicare funds are no longer triple-taxed as under the current system: 1) when payroll taxes are initially withheld; 2) when those withheld payroll taxes are counted as part of the taxable base for income tax purposes; and 3) when the promised benefits are finally received.
How is the tax collected?
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
I can’t do this justice in a blog, consider buying the book or visiting the website, fairtax.org
3 Responses to “Abolish the Incomes Taxes (IV): The Fair Tax”
September 27th, 2007 at 1:38 pm
Great Post!
We need more media coverage about this plan for people to know about it and understand it.
February 8th, 2008 at 6:06 pm
Fairtax sounds great. Nothing could sound simplier, easier, and more helpful that Fairtax.
Wow. Wish it would work. There is a lot of truth in Fairtax plan. Too bad math and logic isn’t part of that truth.
Yes, its true only PEOPLE pay the fairtax, or any tax.
So tell me, what’s fair about a cancer patient, who may earn 40,000 a year, being charged 60,000 in taxes on his surgery, chemo, and rehab?
Tell me whats fair about a nursing home patient, who doesnt have any income but social security (which goes to her nursing home) being taxed 25,000 in a sales tax?
And tell me the logic of having the federal goverment tax the federal government to fund the federal government?
Thats like me pretending I can pay myself 1,000 to cut my own grass every day. I can write the check, I can even deposit the check. But I didn’t gain 1,000 dollars. IF I did that every day, I surely dont have 30,000 dollars in a month.
But Fairtax counts on the federal government to pay for the federal government. Neal Boortz wrote that the fairtax “would make the federal government a major taxpayer.”
When this bit of absurdity plays out — fairtax would be short about 400 billion in tax revenue. And they would have to raise the tax rate to make up for it.
And what about the fairness of cancer patients and nursing home patients paying this extreme tax? Keep in mind, the tax would have to be at least 40%, because 23% isnt nearly enough, if the federal government can’t or wont pay taxes to itself.
Put the tax — 23 or 40% — on nursing home patients, cancer patients, see what happens. Tax the parents of a child with leukemia 70,000 dollars for the TAX — see what happens.
Fairtax actually shifts the tax to two major groups. 1) Federal government (which we just showed can’t happen, and 2) Health care.
And we are about to show THAT can’t happen either.
The cancer patients, nursing home patients, heart patients, surgery patients, ALL patients, will be surprised and pissed, and scream bloody murder.
Health care will quickly get exemptions — because if the Congress won’t do it, many of them will lose the next election. Actually, Congressmen would RUSH to give health care an exemption.
The fairtax wouldnt possibly be 23%. It would probably be more like 60-70%. And it would be a farce.
I actually HOPE and pray they pass it. I would enjoy the farce. I really would.
February 8th, 2008 at 6:48 pm
The FairTax has virtually no chance of passing.
It does serve to raise awareness of embedded taxation. And what the real rate of taxation is.
It’s supposed to be revenue neutral.
And frankly you are paying tax on your health care right now. How fair is that? It sounds absurd, but only because the real taxation rate is absurd.
I agree, I doubt congress would or could maintain purity of thought with the fairtax even if it did pass.