End of the income tax?

WND ^ | Aug. 12, 2003 | Neal Boortz

[FairOpinion]

It's in the hopper. In the last Congress, the number was HR2525. This time, it's HR25. When I speak of HR25 on my show, the residual phone calls continue for days. When I talk up HR25 during a banquet speech, the deserts remain uneaten.

HR25 is called the Fair Tax Act of 2003, and its stated purpose is "To promote freedom, fairness and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the states.

I've been studying and promoting this idea for nearly 17 years. I've debated each and every possible point and objection, and have almost always drawn the opposing party to my side. HR25 has 32 cosponsors and absolutely no organized opposition. This is legislation that would transform our economy and our society for the better, yet this may well be the first time you've heard of it. It's time to bring you up to speed.

Here are the highlights. If The Fair Tax Act were to become law, the following would happen.

The law establishing the federal income tax would be repealed, both for individuals and for businesses.

A constitutional amendment repealing the 16th Amendment would be sent to the states for ratification.

All laws providing for payroll taxes for the funding of Social Security and Medicare would be repealed.

A sales tax would be instituted on the sale of all goods and services at the retail level. This retail sales tax would replace all payroll and federal income taxes.

Government funding would remain at present levels, and no changes would be made to Social Security and Medicare other than the method of funding those programs.

Does the idea sound pretty radical thus far? Stick with me a few hundred more words.

With the passage of HR25, you would receive 100 percent of your bi-weekly paycheck. If you make $1,000 a week, your paycheck would be $2,000 every two weeks. Of that $2,000, you would only pay tax on the money you spend at the retail level. All savings and investments would be tax free. Any money you spend at the retail level would carry a 23 percent sales tax.

Yikes! Did that man say 23 percent? Yeah, I know. It sounds awfully high, but here are some points you need to consider.

First, there are the embedded taxes on every single product or service you purchase at the retail level. Harvard economists have estimated this embedded tax to be around 22 percent of the cost of those goods. That 22 percent represents the payroll taxes and corporate business and income taxes paid by every manufacturer, shipper, wholesaler, merchandiser and retailer having any connection whatsoever with the product you have purchased. These taxes are all added to the cost of consumer goods.

As soon as these taxes vanish, economists agree that competitive market pressures will immediately cause prices at the retail level to fall. So, we almost have a wash here. The prices decrease by over 20 percent, and you start paying a 23 percent sales tax. Remember, though. You brought home 100 percent of your paycheck, and every dollar you don't spend at the retail level remains untaxed.

But what about the poor? They're not really paying federal income taxes anyway, so this big sales tax is really going to hit them hard, right?

Wrong. The Fair Tax Act provides that no family, rich or poor, will pay sales taxes on the basic necessities of life. The cost of these basic necessities is set at the federally determined poverty level for various sized families. At the beginning of every month the head of every household in America will receive a check, or an electronic credit to their bank account, in an amount equal to the sales tax they would pay on the basic necessities for their sized family. This provision is completely neutral as to income, so class warfare political rhetoric becomes useless.

HR25 has friends in high places inside the Beltway. When briefed on the idea, Vice President Dick Cheney told Congressman John Linder: "This needs to be put before the president." Commerce Secretary Don Evans, after being briefed, asked Linder: "Why haven't you passed this?"

And just why hasn't it passed? Because the idea is so bold that many politicians, while personally praising the concept, just assume it can't pass.

It can pass, my friends. It can pass if the people of America learn the details and then let their elected officials know that they want some action. If you have the slightest interest, just go to the website for Americans for Fair Taxation. Every detail is covered, every question is answered.

If America is now ready to accept the possibility of the Red Sox winning the World Series, we can certainly support an idea as daring as the Fair Tax Act.

[EternalVigilance]

Okay, I repent in dust and ashes. I called you a troll on an Arnie thread, but your posting of this marvelous piece about the Fair Tax proves that I was hasty in my assessment. ;-)

Just keep on plugging this issue (which has the potential to do great good on behalf of our freedom and prosperity) and don't be so trollish over the Schwarzenegger/McClintock division in our ranks! LOL...

Thanks for the post, and have a fine day.

[EternalVigilance]

Lewie, you still peddling that crapola?

[boris]

Jews (like me) will be exempt. We never pay retail.

In fact, there's an old joke among Jews: Q:"Why did God create Gentiles [non-Jews]?" A: "Somebody has to pay retail."

I Can Get It For You Wholesale.

--Boris

[FairOpinion]

I think the fact that it got this far is an important signal. This may not pass, but maybe a somewhat less drastic one will at some point. Just think, not long ago, this kind of bill would never even see the light of day and nobody would even bother to go as far as putting one together.

If we get a filibuster proof Republican majority after 2004, we may see some real income tax overhaul, and wouldn't it be nice if that would actually be the elimination of the income tax.

[jla]

^

[FairOpinion]

I agree. They wouldn't need anything like 25%. Maybe 10%? And of course combined with this, they should take a serious look at the budget and eliminate all the wasteful spending and stuff the Federal gov shouldn't be in, in the first place.

[sleeper-has-awakened]

How do you think this would affect real estate prices? Would they also place a tax on home purchases?

[agrace]

Sounds great to me. I have one question though.

As soon as these taxes vanish, economists agree that competitive market pressures will immediately cause prices at the retail level to fall. So, we almost have a wash here. The prices decrease by over 20 percent, and you start paying a 23 percent sales tax.

Will retailers really drop their prices or see this as a windfall?

[coloradan]

One retailer only has to drop his prices a bit to collect a windfall of sales revenue, if all the others hold their prices constant. Lather, rinse and repeat. Market forces are powerful things.

[Tauzero]

"I think this credit to everyone is overdoing it"

Yeah. Just a dandy idea. Let's get everyone accustomed to receiving a monthly check from the government.

Reminds me of the People's Republic of Haven, of David Weber's novels.

[Tauzero]

"The socialists will therefore hate it."

No, they should love it. More efficient socialism is still socialism. I see a grand vista being opened when every household receives a monthly government check.

[sandydipper]

Too good to be true. Sounds like a "free" lunch.

Oh how I'd love to see the IRS dick heads roll. I just hope I live long enough.

[gridlock]

If America is now ready to accept the possibility of the Red Sox winning the World Series, we can certainly support an idea as daring as the Fair Tax Act.

America may be ready to support the Fair Tax Act, but I, personally, will never be able to accept the possibility of the Red Sox winning the World Series. It just isn't going to happen...

[Ditto]

"What about services, subcontractors, etc.?"

The same way state sales taxes are levied --- i.e. Taxable if it for "final consumption" and "non-taxable" if it is part of the content of a final product. Examples would be the costs of producing an instruction manual for a product would be tax exempt while the costs of producing a marketing brochure are taxable.

[Ditto]

"Would they also place a tax on home purchases?"

If it a new home construction, all the materials and labor are taxable. If it is an existing home, it is exempt.

[agincourt1415]

We both Agree! Doing away with the Income Tax will launch the greatest boom in our economy in 100 years.

[coloradan]

If Bush eliminates the IRS, the 'rats can kiss political power goodbye for decades.

[agincourt1415]

Yeah, and if I were Bush or any Republican running in a reelection I would make it a key campaign issue.

If Bush got behind it now, I think the concept would take off.

[Bryan24]

I have a much better solution.

First off, if revenues are tied to consumer spending, an economic slowdown will BUST the budget process. And since it already does this, placing ALL revenues directly on consumer spending will only magnify the problem.

How about we make it really simple?

#1. Pass a national flat tax on all income. 17%. No deductions. The lower limits are:

a. $15,000 for a single person
b. $20,000 for married couples
c. $ $2,000 for each child up to 3 children ($26,000)

For each of those categories, each additional $1,000 earned carries a 1% tax. So, as income goes up, taxes go up.

$15,000 = No Federal Income Tax = $15,000 take home
$16,000 = 1% Federal Income Tax = $15,840 take home
$17,000 = 2% Federal Income Tax = $16,660 take home
$18,000 = 3% Federal Income Tax = $17,460 take home
$19,000 = 4% Federal Income Tax = $18,240 take home
$20,000 = 5% Federal Income Tax = $19,00 take home
$21,000 = 6% Federal Income Tax = $19,740 take home
$22,000 = 7% Federal Income Tax = $20,460 take home
$23,000 = 8% Federal Income Tax = $21,160 take home
$24,000 = 9% Federal Income Tax = $21,840 take home
$25,000 = 10% Federal Income Tax = $22,500 take home
$26,000 = 11% Federal Income Tax = $23,140 take home
$27,000 = 12% Federal Income Tax = $23,760 take home
$28,000 = 13% Federal Income Tax = $24,360 take home
$29,000 = 14% Federal Income Tax = $24,940 take home
$30,000 = 15% Federal Income Tax = $25,500 take home
$31,000 = 16% Federal Income Tax = $26,040 take home
$32,000 = 17% Federal Income Tax = $26,560 take home

The tables for the married and married w/children will look similar to this.

#2 All monies earned from interest entered into savings from this point forward, will NOT be subject to taxation. You brought home $38,000 after taxes and put $10,000 into some type of savings (bank, stocks, mutual fund, CD, etc...) and earned $1,000 from that savings investment. NO TAX on the earnings.


#3 Over a period of years, phase out Social Security. All retirement will be privately financed.

[Dead Dog]

I am fully on board this bandwaggon. However, I do have one question/observation:

As with the prices of goods, our wages will be driven down by competition. This is not necessarily bad, as that if we stay revenue neutral, our purchasing power will not decrease. The big question is, where will the system equalize?