The FairTax would be Fair, untax the “Poor,” and untax Education
The FairTax would provide every household in America with a rebate of sales tax paid on necessities. Thus, The FairTax is progressive and every family is protected from tax on essential goods and services. Because of the planned rebate, those below the poverty line would have a negative effective tax rate and lower middle-income families would enjoy low effective tax rates.
The responsibility of paying taxes to fund our way of life would be fairly distributed. It would, in fact, be much more fairly distributed than the income tax. Wealthy people spend more money than other individuals. The FairTax will tax them on their purchases and as a result, the wealthy pay more in taxes. If, however, they use their money to invest in job creating businesses, or to finance research and development to create new products, (all of which help improve the standard of living of others), those activities would not be taxed. The FairTax is premised on the notion that it is fairer to tax individuals when they consume for themselves above the essentials of life, rather than when they invest in others or contribute to society.
The FairTax would in effect give a supercharged charitable contribution deduction because people would be able to give to their favorite charity free of any income tax, payroll tax or sales tax. The charitable deduction today allows people to make their contributions with pre income tax dollars, but after payroll tax dollars. For the three-quarters of Americans who do not itemize, most must today earn $155 to give $100 to their favorite charity or to their place of worship. [1] Under The FairTax, they must earn only $100 to give $100, since under The FairTax what you earn is what you keep and charitable contributions are not taxed.
Education is one of the keys (along with savings and hard work) to an improved standard of living. That certainly was true in my case. I was the first person in my family to attend and graduate from college. It took a lot of hard work, and a lot of sacrifice by my parents. The FairTax is education friendly and is dramatically more supportive of education than current law. The FairTax embodies the principle that investments in people (human capital) and investments in things (physical capital) should be treated comparably. The current tax system, in stark contrast, treats educational expenditures very unfavorably.
Education is the best means for the vast majority of people to improve their economic position. It is the most reliable means people have to invest in themselves and improve their earning potential. Yet the tax system today punishes people who invest in education, virtually doubling its cost. Only a national sales tax on consumption would remove this impediment to upward mobility. No other tax plan would do so.[2]
Today, to pay $10,000 in college or private school tuition, a typical middle-class American must earn $15,540 based only on federal income taxes and the employee payroll tax.[3] The amount one must earn to pay the $10,000 is really more like $20,120 once employer and state income taxes are taken into account.[4]
The FairTax would not tax education expenditures. Education would be paid for with pre-tax dollars. This is the equivalent of making educational expenses deductible against both the income tax and payroll taxes today. Thus, a family would need to earn $10,000 to pay $10,000 in tuition, making education much more affordable (not considering state income taxes on education). The FairTax would make education about half as expensive to American families compared to today.
The FairTax would improve upward mobility but no longer punish work, savings, investments or education. It would better enable people to improve their lives. It would no longer hold people back.
Maybe when "ancient_geezer" gets online he can add some of his sources and help us understand the debate further.
Cain has done such a thorough job, it's kind hard to add to it. However for those who desire completeness, here is the index to all the testimony before the Ways & Means committee on the subject.
It should be carefully noted that the primary push of the testimony overall is to qualify our Coporate tax system under WTO guidelines as a WTO qualified "indirect tax". After pushing through the verbiage, most of the testimony comes down to praising a VAT with an individual income tax. In short the same ole shell game we have today with a push to move more taxation behind a veil of inflation where it is not visible to the voter.
They still want to play the political game of:
A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw
The siren call for representation without taxation is the formula that got us where we are at today. The ability to hide or disguise taxation from the view of large sectors of the electorate allows the Congress to get away with the creation of the evergrowing monster that it fosters.
Liberty and freedom have a price, responsibility. If that price is avoided there are no brakes on the growth of government, the ultimate result is the end of freedom through creeping socialism.
We need to end the shell game and take the blinders off the electorate, or expect government to continue it's growth without bound.
Walter Williams makes the bottom line case against the income/corporate tax shell game we now have:
Walter Williams, World Net Daily, 10-25-2000
According to the most recent U.S. Treasury Department figures, ... the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?
If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
The income/VAT case of the Europeans, and Jorgenson's "efficient taxation", perpetuate and indeed just make the problem worse not better.
Efficient Taxation should not be a goal in itself, The government has too much revenue as it is, it needs to be trimmed and impeded not enhanced for ever more additional growth.
Off my soapbox, here are the links to the Select Revenue Measures testimony:
| 1 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony Congress enacted the extraterritorial income exclusion (ETI) in response to World Trade Organization objections to the Foreign Sales Corporation (FSC) provision of the tax code. They state that a nation may have a border-adjusted "indirect" tax http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9enti.htm |
| 2 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony The tax treatment of foreign income has become increasingly important in light of the WTO´s decisions regarding U.S. export subsidies, and growing controversies regarding corporate sheltering and corporate inversions. Export subsidies: I agre http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9gale.htm |
| 3 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony 1. Fundamental tax reform through the EFFICIENT TAXATION OF INCOME consists of two parts, an Efficient Capital Income Tax and a Proportional Labor Income Tax. The Proportional Labor Tax would tax labor income at a flat rate of 10.9%. The Efficient Capit http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9jorg.htm |
| 4 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony We could improve our tax system along all dimensions by replacing a substantial part of both individual and corporate income taxes with a consumption tax. Consumption tax proponents must abandon the fantasy that by enacting a consumption tax, we can comp http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9grae.htm |
| 5 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony Once we have qualified our corporate tax as an "indirect tax", we can then exclude export income from U.S. tax. An "indirect tax" under WTO rules has a base equal to value added. Only two amendments are necessary to convert our existing corporate tax on n http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9chri.htm |
| 6 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony The current income tax system cannot be reformed. First, it should promote economic growth by reducing marginal tax rates and eliminating the tax bias against savings and investments. The charitable deduction today allows people to make thei http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9cain.htm |
| 7 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 5-9-02 Testimony In particular, higher marginal corporate tax rates in the United States and the double taxation of dividends puts U.S. firms at a tax disadvantage. Reducing corporate income tax rates and integrating the corporate income tax with the personal incom http://waysandmeans.house.gov/srm/107cong/5-9-02/5-9enge.htm |
| 8 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 4-10-02 Testimony The GATT Dispute Settlement Panel ruled that the DISC regime was a prohibited export subsidy. On November 15, 2000, Congress enacted the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 which repealed the FSC regime and put in its place the E http://waysandmeans.house.gov/srm/107cong/4-10-02/4-10chor.htm |
| 9 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 4-10-02 Testimony First, I am extremely pleased to have this chance to discuss with my former colleagues the critical issue of ensuring that U.S. international tax rules provide a level playing field for U.S. businesses to compete globally. Unfortunately, the most recent W http://waysandmeans.house.gov/srm/107cong/4-10-02/4-10arch.htm |
| 10 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 4-10-02 Testimony Today, the Select Revenue Measures Subcommittee begins its examination of the Extra-Territorial Income Exclusion Act, which replaced the Foreign Sales Corporation regime. Under such systems, only income earned within the home country is taxed; income earn http://waysandmeans.house.gov/srm/107cong/4-10-02/4-10mccr.htm |
| 11 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 4-10-02 Testimony The subsidy was initially provided by granting tax deferral for export income earned through a U.S. corporation that qualified as a Domestic International Sales Corporation (DISC). In 1984, Congress largely replaced the DISC subsidy with an subsidy for e http://waysandmeans.house.gov/srm/107cong/4-10-02/4-10mcin.htm |
| 12 | Committee on Ways and Means, Subcommittee on Select Revenue Measures, 4-10-02 Testimony The January 14, 2002, WTO Appellate Body Report in United States - Tax Treatment for "Foreign Sales Corporations" - Recourse to Article 21.5 of the DSU by the European Communities (the "AB Report") upheld the decision of the WTO panel that the FSC Replace http://waysandmeans.house.gov/srm/107cong/4-10-02/4-10garr.htm |
Maybe when "ancient_geezer" gets online he can add some of his sources and help us understand the debate further.
Refer to #82 above