Abolish the IRS

The Observer Online ^ | 11/8/05 | Scott Wagner

[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

[Protagoras]

First, repeal the 16th Amendment, then and only then, would any self respecting libertarian sign on to this.

[Protagoras]

The Baby Boomers are about to retire, and they won't be happy about paying Federal taxes on their income their whole working lives, and then getting bent-over twice by paying Federal taxes on everything they buy during their golden years.

Bingo.

Also, People might want to think about what the short term effects on the economy will be if this thing ever saw the light of day. I know what one person will do (me).

I would immediately stop buying anything whatsoever that wasn't absolutely essential for life. I'd pocket the savings for as long as I could to try to get whole from all the years these filthy thieving thugs have stolen my money. Then and only then, would I ever buy anything I didn't need.

[righthand man]

ping me

[Rhadaghast]

Thanks:
I will do all that again!

[Final Authority]

It maybe a backdoor approach to abolish congress but in reality the farttax is a way to impose sales taxes on retirees who have post tax investments to spend and have planned on financing their retirements otherwise at a very low marginal income tax rate.

Already members of congress have considered how to compensate in advance those who have put aside money post tax if in fact such a sales tax was implemented. It has been labeled a pre-index payment. Such a payment would totally bankrupt the US treasury as the payments would be in the many hundreds of billions. Because of that, and the effect of not doing that, the farttax is DOA in congress.

[ancient_geezer]

You are now on the pinger, welcome aboard :O)

[pigdog]

Please give us a link to where your "members of congress" have considered such compensation. There's no such provision in the FairTax bill - and none needed in fact.

Anyone planning to live off the financing of their retirement with their post income tax investments can certainly do so since income from those investments isn't taxed under the FairTax. Spending of the amount from these investments is likely to result in quite a bit lower effective tax rate than the Marginal FairTax rate (in the bill now that's 23% tax inclusive but it may end up lower).

These folks will have untaxed money from their post FairTax investments and prices will be lower to boot so they will do quite well. And don't forget, they'll receive the prebate also.

If these folks were to remain and spend the money under the income tax they would also be paying some tax on the income typically plus the higher prices due to hidden tax effects as well as having to actually earn more to pay a given priced item due to the income tax. A $100 sale price under the income would require a person still working to earn something like $149.90 using the tax exclusive figures the FairTax opponents like to quote or $133.30 tax inclusive.

[pigdog]

Actually the short (and long) term effects on the economy would be dramatically good.

But, hey, why "pocket" the savings (which WOULD be considerable) ... why not invest them since investment income is not taxed and it helps boost the economy?

[Protagoras]

You guys have lots of projections and predictions. I know millions of people who do that in the market everyday.

[Protagoras]

It will be hard for the market to go up with both an income tax and your sales tax. And the only prediction that is almost dead certain is that you will end up with both.

Repeal, then change, anything else is a pig in a poke.

[Final Authority]

So you and the other generationally envious farttaxers believe in double taxation. Not gonna happen as the Boomers vote in droves compared to the weak, the useless, and the indolent X'ers out there.

Because you farttaxers work so hard to dispel the truth about double taxation makes it clear to any reasonable person that in fact what you seek is indeed the extraction of wealth from those who have earned it to featherbed your indolence.

This is indeed a generational issue, as other threads on this forum have demonstrated. The hatred of the weak and useless generations who have come after the Boomers are well known. It is better that you educate yourselves and begin to work hard rather that to expect those of wealth to pay additionally to what has been expected over the years.

In Massachusetts the same is clear as the legislature and the Governor, Mitt Romney are intent on making health insurance a personal requirement for residency as auto insurance is a requirement for driving. The largest complainers are the weak and useless X'ers and later generations who actually believe that the Government owes them good health because there are so many "rich" people out there. Same with the farttax, and you can't argue otherwise.

BTW, for most retirees, with post tax investments, their real income tax rate is most likely around 10% after personal exemptions, because they no longer pay payroll taxes, so to say that a 23% tax on spending is lower than their marginal tax would be otherwise, just shows how deceitful and idiotic you are.

[pigdog]

Good for you. Hope you can sort out the truth from those millions and get rich.

With the FairTax you needn't sort out the millions since the truth is right in front of you with the FairTax bill itself plus extensive studies from many different economists, plus your own experience with the income tax - all showing that the FairTax is good for the country, its economy, and its citizens.

[pigdog]

Nice cartoon, but you obviously haven't read HR25. It eliminates the income tax (and several other taxes as well), the IRS, defunds the IRS (for good meanure), and requires the income tax records to be destroyed.

For those reasons your predictions of "having both" are just nonsense attempting to use scare tactics that aren't even real.

[Protagoras]

A pig in a poke. Both taxes is what you will get. Only children believe in the easter bunny.

[Protagoras]

Nice cartoon, but you obviously haven't read HR25.

It doesn't repeal the 16th first. Only a dupe thinks it won't be both taxes.

[pigdog]

Boomer, Schoomer ... you've got some of the most foolish notions I have seen on these threads. You jump to some half-vast assumption and then hammer away at it despite the fact it is meaningless.

You don't even seem to realize that double taxation exists for you "wunnerful, industrious" boom-booms right now with the income tax and even if you'd already paid tax on you massive hoards of bux, you're going to pay what amounts to a hidden tax when you buy things due to the costs of taxes embedded into prices and hidden from you. Believe it or not, but income taxes drive up prices and you won't escape from paying more when you buy under the income tax.

If you don't think so, you're in serious need of a reality check. And you needn't be double taxed under the FairTax; just invest the money you've "brought over" and, since investment income (or any other) is not taxed under the FairTax merely use that investment income to purchase things with the prices that have been lowered under the FairTax. That way the funds "brought over" are not taxed at all (except for what you've already paid under the income tax).

If you're up to it, a little calculation will show you that you'd do better with the FairTax since not only do YOU control the timing and amount of taxable consumption (and remember not everything is taxed), but your effective tax rate wold typically be much lower that the marginal rate. Check the FairTax website or look here:

http://www.fairtaxvolunteer.org/smart/faq-main.html#48

As to your claim of "10%" income tax, that's very unlikely since the 2006 rates for a single taxpayer (10% )top out at $7,550 and I doubt many (Boom-Boomers or not) can live too well at that level. Even at the 15% rate, it tops at slightly over $30,000. Take a look at the FairTax graph in the link I just gave and you'll see the effective rate is much less than that. Even at the $25,000 spending level (on which there are no hidden taxes embedded in prices) the effective rate if not far from 0% due to the prebate. With the income tax at either 10% or 15% the person would also be paying increased prices due the the hidden taxes.

Better shape your Boomer buds up as they're greatly mistaken when it comes to the FairTax and they'll pay a great premium to remain under the income tax in the mistaken belief they are "saving" money or not being "double taxed".

Your comment about "... shows how deceitful and idiotic you are ... is both wrong and incorrectly addressed.

[pigdog]

No kidding ... how is it the income tax, the IRS, the tax code that applies, and the IRS funding that has been eliminated will be restarted with the snap of your fingers???

Also, how will those destroyed income tax records be re-materialized from the bonfire smoke???

"Only children believe in the easter bunny what's required in the law will be ignored."

[pigdog]

Obviously you haave read neither HR25 nor the FairTax website where it states:

http://www.fairtaxvolunteer.org/smart/faq-main.html#42

"Only a dupe thinks it won't will be both taxes."

[Final Authority]

There might be a few rich Boomers like me out there, and I would do very well with a 23% tax and the pre-index payment beforehand, but the vast majority of taxpayers will be hugely double taxed by a sales tax when they have already paid taxes on their property.

As other learned folks have commented, the proposal of the farttax is the largest confiscation of property ever, in the name of fairness, and as such, will never see the light of day.

It is over Piggy, and inane posts like yours will never bring it back. BTW, because you probably don't earn enough to fill out a 1040, you wouldn't understand what you are reporting. $7500 is "taxable" income. Far different than gross receipts.

[Protagoras]

Try to obfuscate. You guys always do. But it is your undoing.

Only a childish dupe believes that the same thugs who have been stealing your money for so long will can suddenly be trusted to repeal the 16th after they get the brand new tax.

Both taxes at some point, bet your life on it. Of course, you might be dead by then, leaving it to screw my grandchildren.

I guess that no matter how far fetched your scheme has of being enacted, it is somehow even more farfetched or even impossible to do it right the first time.

Repeal first, replace second. Only a fool or someone who actually wants both taxes would do it otherwise.

A pigdog in a pokedog.