50 Reasons I Support the FairTax

Comment: 50 Reasons I Support the FairTax (How many reasons can you give for supporting the present IRS tax system?)

1. It allows workers to keep 100% of their pay, with nothing withheld the IRS or for Social Security and Medicare payments.

2. It is revenue neutral with the present income tax system, funding the federal budget at current levels.

3. It shifts the tax to consumption. Records show that consumption is more stable than income, therefore the tax revenue stream is likely to be a more stable and predictable amount.

4. It is progressive, a “prebate” of the tax amount up to the poverty level is given to everyone. This means that those spending below the poverty level have a net gain because the “prebate” exceeds the amount paid in taxes. (Under the present system the working poor pay the payroll tax even if they get a full refund of income tax withheld.)

5. It doesn’t tax pre-owned items – clothes, cars, homes. Only new items are taxed when sold by a business to an individual.

6. It is expected to remove an average of 22% of the cost of American made goods by removing the built-in payroll tax (the other 7.65% of earnings that employers pay), corporate income tax, and other business taxes that are now passed to consumers as an “embedded" tax of approximately 22% due to the cascading of income and payroll taxes paid by U.S. employers, at every step of production, to the U.S. Treasury. Competition will cause prices to fall by approximately that amount, on average.

7. It allows families to save more for home ownership, education, and retirement. An average family making $50,000 will have $7,500 more spendable income.

8. It removes the need for formal accounts of the 401(k), IRA, HSA, etc., varieties. Anyone, rich or poor, will be able to set up any kind of savings or investment account without regard to taxes or the government. No special knowledge of tax law is necessary.

10. It eliminates the income tax and the IRS. Members of Congress and the public overwhelmingly agree that the current internal revenue code is cumbersome, intrusive, coercive, and inefficient.

11. It eliminates 90% of the cost of compliance. American families and American businesses waste an estimated $250 – $600 billion per year (and countless hours of time) doing the paperwork necessary to comply with the current tax code. That is roughly $1,000 – $2,000 annually for every man, woman and child in the U.S. (Businesses typically pass their tax bills and compliance costs on to the consumer, i.e., individuals and families.)

12. It’s simple, unambiguous, and certain, the opposite of the current tax code, 60,044 pages and counting.

13. It assures that no American will find, at the end of the year, a need to get a loan to pay taxes as an alternative to penalties, interest, or cheating.

14. The broader tax base comprises everyone spending money in the U.S., including the ten percent of our economy (an estimated $1 trillion) that today is underground or under the table. Under the FairTax, the illegal drug dealer will pay his tax just like the rest of us when he buys his sunglasses, BMW, and other items, as will those who work for cash and undocumented immigrants, all of whom receive government and societal benefits.

15. It encourages work by letting workers keep 100% of their earnings and giving a rebate, in addition, making the notion that “the more you work, the more money you have”, a reality, unlike the current system where welfare is lost when you go to work, so the first dollars earned after taxes just offset what a welfare recipient is currently receiving in assistance, so working is perceived as disadvantageous.

16. It allows more of the lower income families to become home owners by allowing a second job income above their current income (all tax free) to be applied to a mortgage. Money for down payments for homes is also saved totally tax free, causing it to accumulate faster.

17. It has the result that all lending in America will be at the equivalent of today’s tax exempt interest rates, which are 25%-30% less than today’s taxable home mortgage interest rates. This will create a huge boom in housing purchases and allow existing homeowners to refinance and reduce their cost of homeownership substantially.

18. It allows families to retain farms and businesses in the hands of those who built them through the elimination of the death tax.

19. It allows families to give tax-free assistance to one another by eliminating the gift tax.

20. It gives individuals (and businesses) the right to donate as much as they want to in a given year to charitable causes, without concern for exceeding an allowed limit on giving.

21. It encourages individuals to self-insure, making the health system more direct-pay (no 3rd party pay), thus bringing costs down.

22. It puts an end to the anxiety for honest taxpayers that begins soon after January 1 for most of use, culminating in wondering whether we’ve claimed everything we legally could and nothing we shouldn’t, all without raising questions at the IRS. It makes April 15 just another day. (Perhaps it will be a holiday after the FairTax is enacted!) FairTax and Social Security and Medicare

23. It eliminates the regressive payroll tax that hurts the poor. Currently, every one of us is taxed a minimum of 7.65% on our first-dollar of wages up to $90,000 (the cap for FICA, not Medicare), if we earn that much. It provides funding for Social Security and Medicare at a level equal to or greater than the present.

24. It provides that all 290 million Americans and 51 million visiting tourists fund Social Security and Medicare with their purchases. Today only 110 million workers fund these programs via deductions from their paychecks.

25. It assures that the wealthiest Americans will be voluntarily helping to fund social security with every last dollar they spend above the poverty level. Today, earnings are subject to FICA taxes only up to $90,000. The wealthiest Americans therefore do not pay into the system above that amount. If their earnings are from investments, no earnings fund the Social Security system.

27. It allows for better planning by businesses, because they no longer have to consider tax implications for everything they do.

28. It makes higher employment or better compensation possible in the small business sector, where today it costs approximately three dollars in compliance costs to pay one dollar in payroll and income taxes.

29. It makes American products more competitive overseas by removing the embedded tax from them, thus lowering the prices of our exports, which compensates for low foreign wages.

30. By making our exports more competitive overseas, it lowers our balance of trade deficit and increases employment at home.

31. By removing the embedded tax from them, it makes American products more competitive with imports here, compensating for the low cost of imported products from which taxes have been removed before exportation to the U.S.

32. It encourages investment in companies located in the U.S., thus providing a home for money already in the U.S. and attracting more. The U.S. will be the most attractive tax-free haven in the world for doing business.

33. It encourages repatriation to the U.S. of money held by U.S. individuals and companies now in foreign countries, with no tax consequence. American companies will return from offshore and overseas.

34. It results in a windfall profit, likely to be invested in job-making businesses, for many of those holding taxable corporate high interest bonds at the time of passage of FairTax, since the bonds will not be taxed under FairTax. (Currently, a higher interest rate is usually paid to entice investors to buy the corporate bonds rather than go with the lower interest, but tax free, municipal bonds.)

35. It results in Federal Reserve rates being based on current consumption, which is rather stable, instead of future earnings, which are less predictable, resulting in surer inflation prevention.

36. It reduces production costs for farmers and other subsidized businesses, leading to a reduction in subsidies, thus reducing the federal budget.

37. It moves many individuals now providing tax advice (return preparation, advice, accounting, planning, and records maintenance) into an expansive economy where they will be producing goods and services. There they can add to the standard of living of all Americans and likely earn more than they do currently, instead of shuffling paper for the government (and not contributing anything economically to society).

38. It frees churches and other non-profit organizations from the expense of filing tax returns and paying their half of Social Security and Medicare payments for employees. There will no longer be any 501(c) (3), 501(c) (4), etc., non-profit tax status, because there will be no more tax to be exempt from.

39. It restores to churches and non-profit organizations the 1st Amendment right to engage in free speech, without fear of losing their tax-free status. FairTax and Rights and Freedoms

40. It restores the 4th Amendment, protecting against unreasonable searches and seizures, from which the IRS presently is exempt.

41. It restores the 5th Amendment, which guarantees the right to due process. Under current systems the IRS has their own courts with their own set of rules not included in the 5th.

42. It restores individual privacy. The government no longer needs to know where you work, what you are earning, and what you are doing with it.

43. It relieves citizens of the risk of facing the shift in burden of proof that is so common with the current system, i.e., the taxpayer is guilty unless innocence can be proved, but even the IRS staff sometimes gives conflicting interpretations.

44. It eliminates the need to have a "marriage" clarification declaring who you live with, as that no longer has any bearing at all on a state or federal sales tax.

45. It eliminates the need for courts to decide which divorced parent gets to take the tax deduction for children.

46. Without FICA to pay, most states, counties, municipalities, and school districts will see a large increase in their state budget revenues, additionally lowering the overall tax burden (State & Federal) for most Americans.

47. It eliminates the administrative costs incurred by states in collection of state sales taxes because states will piggyback the state tax collection onto the national tax collection, for which they are compensated by the FairTax ¼% administrative cost give-back. (Retailers receive an equal amount for collecting the FairTax.)

48. It cleans up a major flaw in campaign financing, eliminating campaign donations for "tax favors".

49. It eliminates wrangling in Congress over tax cuts, the tax code, and who is or is not paying a fair share of the tax bill, providing more time for debate on more productive issues.

50. It’s good for the environment. Reportedly, the IRS sends out 8 billion pages of forms and instructions each year. Laid end to end, they would stretch 28 times around the earth. Nearly 300,000 trees are cut down yearly to produce the paper for all the IRS forms and instructions. Also, since it taxes only new items, it would encourage buying tax-free pre-owned cars, clothes, furniture, houses, etc. Reuse is good for the environment, too.

I had written a lengthy response to your post addressing each of your points. In the end I decided to trash it. Your concerns are not so much with the NRST as they are with people, specifically politicians but politicians are just people in particular positions of power. I assume the desire of all of us is to minimize that power and to make what is left work equally well for all of us.

You think that by changing the location of the tax collection tollbooth that these fellows are going to stop manipulating the system.

There is a world of difference between taxing consumption instead of income. It is not just relocating the collection point. Karl Marx recommended the income tax as the best way to bring down Capitalism. Alan Keyes said:

Last week I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accepts it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them. And in the 20th century we have seen the horrors to which such conclusions tend.

President Clinton is a kind of prophetic precursor of the kind of leader we can expect increasingly to see -- naturally and easily presuming that the entire people he leads is merely an instrument of his own ego. This trend has been going on throughout the course of the 20th century, and is now coming to a head in the explicit precedents set by Clinton of the usurpation and abuse of power. The leaders of tomorrow's America are watching now to see just how much this people will put up with, and they are forming their ambitions accordingly.

If we pay any attention at all to the current fake debate on tax cuts, it should be with this overall ambition of our governing class in mind. It is bad enough that Republicans expect us to be overjoyed at a tax cut that is less than half of the Reagan era tax cuts, and that is stretched out over 10 years. The tax cuts they are offering us are less than one third of what we are predicted to pay in "extra" taxes over that period. It is like overpaying for a car by $3 thousand, and being happy to get a check back for $8 hundred.

Yet what is worse is that even this minimal tax cut is being opposed in the Congress explicitly as a waste of federal dollars! But keeping more of our own money can be a waste of federal dollars only on the assumption that all of the money belongs to the federal government, and that politicians are doing us a favor when they let us keep a bit of it. This is exactly how they talk -- and I don't just mean Democrats. All the politicians in the country speak of it as a great favor when they let us keep a little more of what we have earned, and expect us to go down on our knees in gratitude and vote them back into office.

I believe that the reason our ruling class in Washington talks about all income as the property of government is that since the passage of the 16th Amendment, it really is. We made a major mistake at the beginning of this century, and as a result of that mistake we turned over to the government control, in principle, every last penny that anybody in this country makes or earns.

If I agree to turn over to someone a certain percentage of my income and also agree that the same person gets to set the percentage -- how much of my money does that person control? The answer, of course, is that he controls all of it. Anything he lets me keep based on an arrangement like that is simply a favor. Once I've made the agreement I have ceded to him the right to take whatever percent of my money he wants. The income tax is a system under which we have ceded to the government a pre-emptive claim to a certain percentage of our income, and the government sets the percentage. In principle, the government controls all of our money. That is why those in power talk as if they control all of our money -- they do.

The limitless extent of control the income tax gives to government was understood and recognized by some people even when the income tax was being instituted, and they fought it tooth and nail. Some of them pointed to the fact that, in the 19th century, Marx and Engels had written about the income tax for this very reason. One of the major elements of the communist agenda was taking over the people's money by means of the income tax, precisely because of the unlimited nature of the control it offered. So as we have been fighting communism throughout the 20th century, we had already put in place at the beginning of the century one of most important elements of communism, and we suffer under it right now.

The income tax, and the Federal Reserve system that arrived along with it, are instruments of the increased centralization of money and control over our economy, with all the bad effects that result from such control. As our political class becomes more ambitious, unscrupulous and dangerous, the entrenched centralization of our economic system remains an ever-present opportunity for them to extend further control over our lives.

The debate goes on about farm policy, for example. Every few years we have a new cycle of it, while we lose more and more of our farm families. Every politician under the sun, of course, stands up to say that we must "save the family farm." And yet every time a bill is passed to save the family farm, we lose more family farms.

The root reality that must be faced by those struggling to protect the family farm in America is that we cannot sustain a system of family farms in an economy with a centralized financial structure. This was the basis of the debate in the 19th century between supporters and opponents of a national bank. Opponents understood that the survival of grass roots institutions, including the preservation of businesses and farms in the hands of people in their communities, required banks that were citizens of those communities. Banks answering to higher powers, including centralized authority, and using the resources flowing through them to beef up the bottom line of institutions that don't answer to local citizens and aren't part of the local community will let local institutions go under when the times get tough. In such institutions, the family farm is struggling against a financial structure that is incompatible with its existence and survival.

Survival of the family farm won't be secure until we have changed the fundamental structure of finance and lending that services family farming. We must get control of local economic resources back in the hands of people in responsive local institutions that will care about what happens to the people who live in the local community. And what is true of the family farm is true as well of all forms of real local community and corporate life. We simply cannot expect that local and private institutions will flourish, and remain free, if we do not take ongoing and fundamental care to shift the balance of power and control back to them. If we permit economic power to remain centralized, this instrument of manipulation will be increasingly attractive to ambitious men, and used to bring us further under their control. Our founders understood that economic sovereignty was a pillar of defense against a political class eager to abuse its people. They were fond of quoting Blackstone, who said that "A power over a man's resources is a power over his will."

With the presidency of Bill Clinton we have entered an era of politicians who openly view government power as a means to personal gratification. The habits of shame and respect for the rule of law will not restrain our presidents, at least until the disgraceful Clinton precedents are reversed, and the Senate's pusillanimous acquittal of Clinton shows that the people's representatives cannot be relied upon either. The break-up of centralized governmental authority over our economic lives, and above all the elimination of the income tax, has never been a more pressing moral and political imperative. We must reclaim our economic sovereignty, so we can limit the damage our increasingly corrupt political class can inflict on our property, our wills, and our character.

You and Alan seem to agree on everything but the income tax. That seems inconsistent to me.

I am nearly as cynical as you about politicians but I do think there are some who are there for the common good rather than for self-aggrandizement. Just as you said evil intent has nevertheless developed a workable system, that is just the way politics works you said, why do you oppose a better tax system even if you think the intent is evil and will be manipulated?

Since it is a tax on consumption consider that you are buying government services and can, therefore, see how much it costs and what you are getting for your money.

Government can't make people good. In fact, it provides cover for the bad. No better cover is provided that the maze that is our current tax system. The NRST will clean it up and make it transparent. It will be up to us to keep it that way.

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