There is a very good reason for the Rebate. It is the most brilliant part of the legislation once its purpose and the history behind it are understood.
But take for example your objection, that the rebate allows government to “hand out money”. Well, government can do that regardless of whether there is a FairTax or not.
But if the FairTax is passed, enacted and survives, the 16th Amendment will be repealed as part of the FairTax Act.
Now think of that, no more 16th Amendment. That means we fall back to the original two forms of taxation, ‘indirect’ and ‘direct with apportionment’. I don’t believe under the original constitutional provisions for these two forms of taxes that our government can return or “hand out” any money for tax purposes that is not in the same amounts for every qualified taxpayer. In fact, I know this to be the case from the lawyer and economist who is an architect of the legislation.
The FairTax ‘tax’ is an indirect tax and its Rebate must be handled as an indirect credit. That means it must be rebated in the same amount to every qualified person.
But that does not and never does stop government from using any of its tax revenues for redistribution. But a Tax Rebate has to be handled indirectly meaning no favorotism.
Take Social Security. There are many earners who pay much much more into the system than others yet they get the same as everyone else who has paid into the system to qualify for full benefits. The reason is that the Social Security Tax is viewed as an indirect tax, it is the same percentage on gross wages for everyone. If someone chooses or commands a greater wage, it is their choice, just as it is a person’s choice to spend more than others. But it is true that once the 16th Amendment is repealed, Social Security may require an alteration in its collection authority.
The bottom line is that there will be no end of the Income tax (without apportionment) without the FairTax as it is now with its Rebate provision. Because otherwise a return to pre-1913 excise tax America is a return to the problems that brought about the Income tax (without apportionment) in the first place. It was a mistake to legalize a direct tax on incomes without apportionment with passage of the 16th Amendment. But the reasons Americans went along with it are because they knew there was a built-in unfair bias in the excise system and because it did not apply to 98% of American workers at the time.
Americans in 1913 could not do a FairTax because they did not have the technological capability and also the technical administrative experience to administer it. But all of that functionality is commonplace today. Our government can easily collect tax revenues from retailers or from State Tax Collectors. They can also mail out tax rebates easily and that has been demonstrated recently. So the capability and ability are there now, but it wasn’t there in 1913.
Reasons:
Prior to 1913, Americans were fed up with what was called the ‘disproportionate burden’ of excise taxes. Small tenant farmers were incensed that they were required to fund federal government while the land barons they paid crop fees to (rents) paid nothing at all. In short, the Founders had innovated a wonderful simple system that was based on principles of fairness, but the fairness aspect of it got twisted around between property owners and workers. So the solution at the time was the Marxist graduated income tax.
The original tax code in 1913 was 14 pages long, it was a flat tax of only 7% on the richest 2% of Americans. Most Americans thought they would never see an Income tax.
But because the 16th Amendment did not carefully limit the definition of ‘Income’, it became a game to change, alter its meaning or to define certain income as nonincome or nontaxable income, etc. The result is the 16th Amendment is like a single cancer cell that grows and metasticizes rapidly through the great idea known as the American Experiment. We have had five major tax reforms since 1913, each reform attempted to make the tax code simpler, fairer and flatter. This is why a Flat Tax will never work because within a decade it will no longer be flat.
Since the last major tax reform signed by Ronald Reagan in 1986, there have been more than 17,000 tax code amendments and a quadrupling of tax gaming lobbyists inside the Beltway. As it is now there are about 50,000 members of the DC aristocracy that pull up the draw bridge to their Income tax castle. Their potential opposition is in the 144 million filers who are in the process of being educated. On average 800 persons are joining as members of the FairTax grassroots every day. It only takes about 3000 committed FairTax activists in each congressional district to turn the elected representative to the FairTax.
The Income tax without apportionment was first levied unconstitutionally in 1861 by Lincoln. It was shot down by the Supreme Court then and several times after as subsequent Congresses tried to repeat that form of taxation in some variety or another.
It took the Income tax without apportionment 52 years to become legalized by the 16th Amendment. The FairTax has only been around about 12 years. It is necessary to think years out about the FairTax and to be committed to a lifetime of advocating for its passage. Many of us would like to see it passed in 2013, exactly 100 years after the Great Mistake.
Even without the 16th Amendment the Income tax is not illegal as long as it is appropiated ‘with apportionment’ meaning collected from states according to their census. The Income tax with apportionment was a direct tax and was constitutional. Direct taxes were allowed for emergencies such as war or for grand projects such as canals or large bridges. There is a long history here and knowing it helps to explain the brilliance behind the FairTax Rebate.
So as the uninformed call for cuts in corporate tax rates, downsizing government, cutting spending and so on, just be aware that all of the issues along that vein will be lost within a few sessions of Congress. All of that disappearing act that the uninformed feel are the ‘solution’, all of such disappearances are brought to them courtesy of tax aristocrats using the 16th Amendment as their business license. They will slowly add doses of 16th Amendment poison to evade and counter cuts in tax and spending. In short, a tax cut victory if ever achieved will be short-lived unless the 16th Amendment is sheared off the Constitution. And the the question will then be how to collect taxes? Under what code? The answer is the FairTax.
Give it some more thought. Study tax history and read the FairTax legislation. I am sure that whatever your tax ideas, you will want them to stand on a firm foundation, without being twisted and perverted shortly after and without feeling like a fool that you did not understand the American history of taxation.