Posted on 11/10/2005 3:18:48 AM PST by Man50D
Since 1954, the size of the United States' tax code has increased by almost 500 percent. Tax regulations created by the Internal Revenue Service have increased in volume by 939 percent, and in April 2006, Americans will spend a combined total of 6.5 billion hours, at an estimated cost of close to $500 billion, in order to simply pay for the privilege of footing Washington's bill.
It is time for the FairTax.
Perhaps you have heard of the FairTax by now. It is a comprehensive plan for the dissolution of the IRS that would replace all income taxes with an embedded personal consumption tax. According to the website of Americans for Fair Taxation (www.fairtax.org), the FairTax would abolish "personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment and corporate taxes." In their stead would be a 23 percent national sales tax on all consumption goods: a simple, one-time tax that is collected at the retail level.
However, the FairTax is unlike the current sales taxes that exist in this country. These taxes are imposed on top of embedded income tax and compliance costs. In the FairTax Book, written by libertarian radio personality Neal Boortz and Congressman John Linder, a loaf of bread is used as an example to illustrate these hidden costs. For every loaf of bread, the seed producers pass tax costs onto consumers. The shipping company does too. In fact, processors, bakeries, distributors and grocery stores all pass a portion of their income tax burdens onto consumers, no matter how rich or poor they are. Eliminating these costs initially, by eliminating the income tax altogether, would reduce the market price of all products by an average of 22 percent.
Don't take my word for it, though. Take the word of the Harvard Economics Department.
So when these costs are abolished, the FairTax is added and returns the prices of consumption goods to - you guessed it - exactly where they are today. The difference is, of course, that people who are purchasing these things keep every last penny of their paychecks. For low-income families, this would mean an immediate average increase in pay of 25-30 percent.
If you are trying to think of ways in which to oppose this plan, I need to know one thing: why?
The federal government would still steal - I mean, collect - the same amount of tax revenue as it does today under the FairTax. The FairTax does not cut funding from any cherished socialist programs like welfare or Social Security. It is merely a new way for the federal government to pay for its existence.
But wait, it gets better. The FairTax Act of 2005 (yes, it has already been written and is ready to be passed) also contains mechanisms for a "prebate." Based on government figures, the federal government would calculate the "annual consumption allowance" of a household - that is, the amount of money that household can be expected to spend on the necessities of life for that year - and refunds the money. Every household in America gets a tax refund, every year.
In case you had not noticed, wealthy individuals tend to spend more money than poor individuals on consumption goods; thus, the wealthy would end up paying more in taxes than the poor. Most people seem to like this idea.
Finally, the economic impact would be astounding. Driven by the "increasing burden of taxation and Social Security payments, combined with rising state regulatory activities and labor market restrictions," American businesses have been seeking out "tax havens" in other countries with much friendlier tax structures. The media buzzword for this phenomenon is "outsourcing," and believe it or not, our government has been causing it all along.
Passing the FairTax Act would make the United States the "only nation in the world whose companies could sell into a global economy with no tax component in the price system." Companies would rush to bring jobs back to the United States, and their American workers would keep all of the money they earn.
The FairTax is a typical libertarian solution to a greater social problem. Instead of promising more regulations, like many Republicrats typically do, we reduce them. It is a novel concept, I know. The results would be revolutionary.
The FairTax is not a panacea. It does not lower taxes, and it does nothing to curb the spending orgy the Republicrats have been having in Washington. It does not stop pork barrel spending, nor does it re-evaluate how federal money is spent. The responsibility for affecting change in those areas falls squarely on us, as voters.
However, the FairTax would be an enormous stake in the heart of the monstrosity that is the IRS. The thought is enough to make any libertarian smile happily and sleep better at night.
We need the FairTax now.
Scott Wagner is the president of the College Libertarians Club. He writes political satire for the Web site The Enduring Vision and thinks you should go read it. He can be contacted at swagner1@nd.edu
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So when these costs are abolished, the FairTax is added and returns the prices of consumption goods to - you guessed it - exactly where they are today. The difference is, of course, that people who are purchasing these things keep every last penny of their paychecks. For low-income families, this would mean an immediate average increase in pay of 25-30 percent.
One "little" problem. Dr. Jorgenson's study which calculated the 22% embedded tax included the employees' income and SS taxes (both halves) as expenses for the employers. Therefore for prices to stay the same after the Fair Tax is added, each employer will have to keep the pay the employees would have paid in for income taxes. Employees will keep their entire paychecks, but those checks will be smaller than their current ones.
I expect that pay will be harder to change than prices, so employees will continue paying employees their current salaries and pre tax prices will drop by a few percent (for reduction of corporate income, the employers' half of SS and reduced compliance costs) and the post tax prices will be about 20% higher than the current prices.
I like the Fair Tax, but I don't pretend that it is some type of water carburetor where you get something for nothing. The feds still extract about 20-25% and there is no way to do that painlessly.
And so are you going to abolish Congress so the fairytax code does not grow 500%?
Run, run, run, the sky is falling. Cluck, cluck, cluck.
The FairTax Bill HR25 and S 25 the most important legislation since the Constituion. Fax your congressman today and ask him/her to support it, protect it, get it passed without watering down.
I too like the idea in principle but agree that the transition would be, shall we say, awkward. The feds taking your money will never be painless but it could be made less painful and more fair.
Part of the unfairness: People who get a lot of their incomes via cash, e.g. waiters, tend to pay less than their fair share. Also, some of the rich are able to underpay because they keep huge sums offshore and don't pay income taxes on this money.
Yes I agree we need a change.
I like the fair tax also.
However;
Without removal of the Income tax from the constitution we WILL end up with both. Not today, not tomorrow, but eventually.
The fair tax is a dead horse with out the removal of the constitutional incometax.
The only fair tax is a tax on everyone. IOW we all pay our share of the upkeep, and it cannot be based on income. Lets just call it a personal tax, beginning at age 16 for as long as you are alive, It might be called the breath tax, a minimum that all pay without exception.
There are no folks who don't pay, period. The breath tax will be large enough to strike unemployment fear in the hearts of every man and women in the country, and after the breath tax there will be the income kicker, paid by all, no exceptions, of up to 10% but no more than 10%.
This should have the positive aspect of getting rid of a host of organization feeding off the indigent, loafers, and leaches of the land, because everyone will be busy working instead of having time on their hands for wierd mischief, and they will be so busy paying their taxes, they won't have time money, or energy for destructive behavior.
I'm sure that most folks will remember what the income tax was to begin with, around 1% and affected a very narrow percentage of the population, and very quickly rose to levels exceeding even todays tax structure.
Expanding to a larger and larger portion of the population, but dividing the earners from the leaches, but continuing to expand the ability of the leaches to vote and therefore control the earners through the ballot box to the point today that the haves and supposed have nots are at political war with one another.
My tax system would solve this problem and adequately fund the government at everyones expense, but you will notice there is a lot missing, as with the proposed fair tax, there are so many unanswered questions, so if we are going to do it, have a one year or two year test, and get on with it.
I will be paying approximately 13% more than I do now, but put a sunset clause in the test and lets try it. At the very minimum, we would have an alternative or choice, and who's not for choice?
Apparently there was not quite enough wierd humor in my post to get your attention, and you missed the two paragraphs where I was supportive of at least a test of the fair tax despite the sheer stupidity of having a fair tax passed by the congress, and an established income tax in the Constitution of the Unites States of America.
The one must be gotten rid of before the other will have any validity what so ever. I also contend that there are so many unanswered questions regarding the fair tax, that there are, at the moment, far more important issues at hand.
It won't take long. Soon after the new tax system is passed—perhaps during the transition period—Congress will impose a "supplemental" or "emergency" surcharge on the incomes of the "wealthy." Despite all assurances that this will be a temporary measure, it will never go away. Instead, it will grow to include more and more people who do not think of themselves of wealthy. (Remember the AMT?) We will be stuck with the worst of both systems.
Ok sorry if I did not pick up on that - what issues are not resolved? I disagree about "more important issues at hand".
I see no greater issue for our country than the passage of HR 25 - it touches everyone of ours lives and the lives of generations to come and not in just the tax we pay or how we pay it.
The removal of the method for legal bribery from our government cuts deep into the very future of the US and it's security.
The removal of all 501c3 will bring into balance the Green Goofy movement that feeds off this sytem.
These and many more "improvements" are at hand with the FairTax bill.
HR 25 www.Fairtax.org is full of information I would be interested in see anything you have that concerns you.
To me this is a "no brainer" and I would seriously question and judge the motives of those in government that do not support it.
Anything, yes I do believe anything, that puts 501c3's in their place, can't be all bad. I'll have to look at the site to see what else is amix.
If anyone would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie.Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
One "little" problem. Dr. Jorgenson's study which calculated the 22% embedded tax included the employees' income and SS taxes (both halves) as expenses for the employers. Therefore for prices to stay the same after the Fair Tax is added, each employer will have to keep the pay the employees would have paid in for income taxes. Employees will keep their entire paychecks, but those checks will be smaller than their current ones.
Essentially correct in that the NRST replaces the current income & payroll taxes, an in that it is wash overall.
There are gains however in the overhead and deadweight costs associated with the income/payroll taxes system that are substantially reduced under a retail sale tax system providing increased cost efficiencies allowing some lowering of prices with tax that otherwise would not exist. That provides an overall increase in the individuals purchasing power.
What I see as the most likely scenario is that gross wages stay pretty much the same as most are earned under contract and not subject to change on a whim.
I would expect total amount paid (accounting for tax) for consumption would fall 5-10%, while we receive our full checks with no withholding plus whatever FCA sales tax rebate provided for in the bill a household qualifies for.
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