The Fair Tax –an Idea Who’s Time Has Come

When the federal income tax lurched onto to the scene in 1913, nobody could have foreseen the obscene creature it would grow into. By 1954, the monster was well understood, but remedies and solutions were mostly confined to gnashing of the teeth and complaining a lot. These days, at last, there is a viable alternative.

There are twin dragons to slay in this arena. First, the unfairness of the income tax, then the excessive amount of taxation we endure. The Fair Tax (HR 25/S 1493) would address the unfairness issue head on. It would replace the onerous, compulsory, confiscatory federal income tax system with an essentially “voluntary” system. You would only pay the tax when you choose to purchase something. It would also be voluntarily “progressive” since those who have more money would spend more money and pay more taxes. Since it has a provision for the universal rebate of the entire amount of tax up to the poverty level, the truly poor would pay no tax at all, for the first time ever. Today, the very poorest worker pays payroll taxes on every penny they earn. The Fair Tax would abolish that.

The essential nature of the government tax dragon is in its voracious appetite. Government will always demand more and more money and politicians will always be looking for ways to pile more taxes on us. The fact is, it’s too late. Big government is a fact of life. It must be fed, -for now. The Fair Tax could raise enough to cover the current expenditures, and do it without unfairly bludgeoning any segment of society. Since the underground economy (drug dealers, undocumented aliens, etc.) would now also be contributing, it would, in fact lower the burden on many of us.

The best way to satiate this omnipresent taxation monster therefore resides in spreading the burden out among as many citizens as possible. Under the current unfair income tax law, the burden falls almost exclusively on the wealthy. The old story of the ten men splitting a tab for a $100 meal in the same way we split up the tax burden is an instructive example of how this works: The first four pay nothing, the 5th pays $1, the 6th pays $3, the 7th pays $7, the 8th $12, 9th $18 and the tenth, the richest, pays a whopping $59. Yes, our current system is that ridiculous!

The Fair Tax solution sounds surprisingly simple: A national consumption tax on the first purchase of new goods for personal use –a national sales tax. The national sales tax would replace all current income, payroll, FICA, corporate and other taxes on the production of income, AND would accomplish the complete abolition of the IRS and repeal of the 16th amendment. It almost sounds too good to be true, yet the more you delve into it, the better it gets. For example, the current system causes all products sold in this country to be priced at about 22% higher than they need be, simply to cover the built in income taxes imposed at every level of production. Since these hidden taxes would be abolished, you would see a corresponding decrease in prices. This is not just “pie-in-the-sky” thinking. Researchers at Harvard have confirmed it. America would become a haven for manufactures the world over who are looking to avoid their own onerous tax schemes.

This is the bill currently pending before congress that would go a long way to solving this nation’s tax morass. It deserves careful consideration.

Summary of HR 25/S 1493:

Imposes a 23% (tax-inclusive) sales tax on the purchase of new goods and services in the U.S.

Lets workers keep their entire paycheck and retirees keep their entire pension.

Abolishes the IRS and ends all audits of individual taxpayers.

Replaces the federal income tax. Frees individuals from ever filing a tax return again.

Replaces all payroll taxes including Social Security and Medicare taxes. Current Social Security and Medicare benefits would not change.

Replaces corporate and self-employment taxes.

Eliminates all hidden federal taxes.

Provides a universal rebate equal to the sales taxes paid on essential goods and services to ensure that no American pays taxes on necessities.

Replaces all estate, gift, and capital gains taxes.

Dramatically lowers tax rates for low- and middle-income Americans.

Closes all tax loopholes.

Brings accountability to tax policy.

Lets American-made products compete fairly.