Posted on 07/20/2024 8:20:07 AM PDT by Starman417
President Trump recently floated the idea of eliminating the federal income tax. That tax became a fixture in 1913 when Congress ratified the 16th Amendment. The first U.S. Tax Code was about 400 pages. Today, with everything included, it’s more than 70,000 pages! Initially, the income tax was 1% on all incomes above $3,000 ($95,000 in today’s dollars) and applied to only 3% of the population. Today, the graduated rates start at 10% for families earning more than $30,000 and go up to 37% for families earning above $609,000. The rates vary greatly: The top 1% of taxpayers pay 45% of all income taxes, the top 25% pay 89%, and the bottom 47% pay 0%.
Trump understands that the tax system is a yoke on the neck of American prosperity. According to the National Taxpayer’s Union, Americans spend approximately $260 billion a year complying with the federal Tax Code, most of which goes into the pockets of accountants and lawyers. And that doesn’t count the countless billions businesses spend adjusting their operations to reduce their tax burden in the first place.
Trump has floated the idea of replacing the income tax with tariffs on imports. That’s neither feasible nor a great idea, but the notion of scrapping the current system is a compelling one, particularly if it eliminates the IRS. There’s a great (albeit not perfect) replacement for our current system, one that would replace the current dysfunction and replace it with something that would give the American economy a much-needed jolt: The FairTax.
Basically, the FairTax replaces all federal taxes, including Income, Corporate, Social Security, and others. It replaces all of them with a single retail tax to raise a similar amount.
Here’s an example of how it works: Let’s assume it costs $1.00 for a loaf of bread. According to the people at FairTax.org, $.22 of that $1.00 represents the aggregated federal taxes paid by the baker, distributor, retailer, and every other entity who had a hand in putting that bread on the shelf, including the individual income taxes their employees pay. The bottom line, though, is that you’re paying $1.00 for a loaf of bread.
Under the FairTax, all those aggregated taxes would be eliminated. The loaf’s cost would then be $.78, which includes all the inputs and profits from the farmer, distributor, retailer, etc. At retail, the tax would be $0.23, making the bread’s price $1.01, which is almost the same as before.
But here’s the kicker: Under the current system, when you earn $1.00, you only have between $.63 and $.90 cents left after taxes with which to buy that bread. Under the FairTax, when you earn $1.00, you have $1.00 left after taxes. (You can find the extra penny between the couch cushions!)
Given that the bread’s price stays basically the same, one might ask, “What’s the point?” Well, there are many beyond that whole paycheck in your pocket.
1. Spur Investment in America:
America could use a real shot in the arm. GDP growth is miserable (currently 1.3%). “But at least it’s growing,” you say. Not really.
The government will print (borrow) $1.2 trillion this year to pump into the economy, which will likely come in at about $28 trillion. So, basically, the government is adding 4.2% to the economy via debt, which will have to be paid back, even as GDP grows by less than 1.5%! That’s not real growth. The FairTax would fix that. There’s no single thing Congress could do that would more effectively spur investment in the American economy.
The average corporate income tax around the world is 23%. By eliminating federal taxes, Congress would make America an investment magnet. Currently, the world invests $1.2 trillion across national borders annually, $400 billion of which comes here. (While immigrants send $800 billion out of the country annually.)
By dropping the income tax to zero, America would spur companies worldwide to prioritize investment in the United States and create millions of new jobs. At the same time, it would motivate American taxpayers to bring home most of the $4 trillion they hold offshore, as would US corporations that hold additional trillions of dollars outside the country. Both would spur investment and create jobs.
2. Spur Entrepreneurship:
American employment is driven by small businesses that are mostly owned by individuals who report their income on their personal tax forms. By eliminating federal taxes and allowing entrepreneurs to keep more of their money, the FairTax would spur more Americans to become entrepreneurs.
3. Increased Competition and Innovation:
As efficiency returns to the market and more entrepreneurs are motivated to start businesses, competition will increase, which leads to more innovation and lower prices. Consumers will not only keep more money in their pockets, as competition drives down prices, those same dollars will buy even more.
(Excerpt) Read more at floppingaces.net...
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This should get rid of most of the irs.
Abolish the 16th Amendment first.
Won’t happen.
Anyone who wants additional taxation is an idiot.
Bzzzt! Much of the math behind the Fair Tax was from Dr. Dale Jorgenson. In his analysis he attributed the employee paid income and social security taxes to the employer to come up with the 22% embedded tax. Thus to save that 22% from the pre-tax price, the employers would have to reduce gross pay. If gross pay is maintained, then the price reduction would only be reduced by the employer share of the SS tax and their tax on profits. You can't get all three of: trillions of dollars of taxes, the current prices as the total price with the new tax and taking home your full gross pay.
See Free Republic 2005: JORGENSON EXPLODES FAIRTAX MYTH (FR Exclusive)
I like replacing the nightmare income tax system with a simple consumption tax. But the FairTax is not a free lunch. You don't take a quarter to a third of everyone's labor from them without pain.
It's magic!
My income tax is cut to zero and prices remain the same.
WOW!!!
Reduce employee pay by employee income and SS tax? So basically no pay check increase at all. Hilarious. Thanks!
the neoCON free traitors don’t want you to know that the U.S. government was 95% funded by TARIFFS for most of its history.
But tariffs make it so much harder for the elitist ivy league free traitor wall street raider scum to exploit cheap foreign labor and drive down american wages.
Isn’t this the same as Neal Boortz and John Linder’s plan years back?
Philosophically I like taxing what you take from society as consumption rather than what you put in through labor. There are problems during the transition where the ants who worked and saved to consume later get taxed twice while the grasshoppers who borrowed, spent and planned to repay later get taxed less. But the promises of the Fair Tax advocates that I could buy about 25% more goods and services for the same labor didn’t add up. My back of the envelope calculations were a 9% embedded tax. I begged the supporters for their math to get 22% embedded back then. Then Jorgenson’s assumptions were publicized and all became clear: much of the embedded tax is my paycheck.
The Fare Tax is economically sound in principal, while catastrophically delusional in practice. Unless the size and revenue demand of government is reduced massively, any NRST will demand such a large fraction of transactional cost that it WILL result in a huge black market, with government “revenooers” raiding private conduct desperate for cash. If you think the IRS is invasive now, you ain’t seen nothin.
Think of it as a flat rate, universally applied Value Added Tax, with fraud susceptible rebates to lower income folks.
“President Trump recently floated the idea of eliminating the federal income tax. “
The bankers that own the Fed will kill him first.
I prefer a restricted/blocked currency.
Trades of say American engines for an equal valued amount of Mexican auto parts would be tariff-free. Democrats and RINOs in DC should not be given more money to squander.
If GM simply bought Mexican auto parts, it might have to pay an unblocking tax of 10% in January 2026 going up by 1% monthly to 22% in January 2027 and to 34% in January 2028...
If Jose wanted to send money to Maria in Mexico, he might have to pay an unblocking tax of 10% in January 2026 going up by 1% monthly to 22% in January 2027 and to 34% in January 2028. If Jose simply paid for American food from El Paso and Maria paid for freight, neither would pay an unblocking percentage.
As a retiree, this is my main objection to the Not-All-That-Fair Tax. Either return the income taxes that I paid for decades, or exempt me from the increased sales tax.
I prefer a restricted/blocked currency over tariffs.
I also prefer to keep the now well-understood income tax system, but with caps in the Constitution to protect the middle class (those with government-supplied incomes of full-time federal civil servants).
Conceptually, this would replace current irs code.
“tariffs make it so much harder for the elitist ivy league free traitor wall street raider scum to exploit cheap foreign labor and drive down american wages.”
I suspect Chinese industrial wages are about a fourth of those of the USA. A 25% tariff isn’t going to make much of a dent in the approximate 300% difference.
Conceptually, I’m afraid it’s an additional tax.
No way is FedGov going to give up income tax.
We can’t even challenge the expansion of what is “income”. Tips are not “income”. Let’s see Trump reverse the tax code.
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