As of late many presidential candidates have adopted the FairTax plan. In fact, just about all of the candidates on the Republican side do. Yet despite its growing popularity, there are still many in America who don't even know what it is. That is a shame, since it's one of the best tax reform plans out there. For a complete description of the plan read "The FairTax Book," By Neil Boortz and John Linder. The FairTax plan is essentially this: The complete abolition of the I.R.S., and the income tax, and its replacement by a higher sales tax. This would eliminate the need for a 60,000 page tax code that no one understands. It would not only eliminate the income taxes, but also payroll taxes, corporate taxes, capital gains taxes, gift taxes, and estate taxes. The sales tax would be high, 23% to be exact, but this would be more than made up for by the fact that the prices on goods would be much lower with businesses not having taxes eating into their profits. In addition, the FairTax includes a prebate given by the government to compensate for all spending up to the poverty line. I know that sounds complicated, but it essentially means that the government would send you a check every month that would pay the taxes on the items that are necessities for everyday life. This prebate would be based on a government estimate of how much spending in necessary per person and would be payed out to each family based on its size. The prebate could theoretically result in those who are living on the bare necessities to pay no taxes.
The good thing about the fair tax is that it fixes the worst problem in our tax system, which is that we punish people for their success. They worked hard to become rich, and now they have to pay a ton of taxes, whereas the lazy bum who never worked a day in his life pays next to nothing. We punish people for working hard, which of course, discourages them from doing it. The result of the FairTax, is that we end up taxing people for buying things that they don't need. The result would be that more people would be saving money, and less people would be going into debt because of their horrible spending habits.
The only real flaw I see in the FairTax is that, while it does eliminate the income tax and the tax code, it doesn't stop the income tax from coming back. That's the problem with all tax reform, it doesn't have the authority to permanently forbid a federal income tax. The only way to do that is by repealing the Sixteenth Amendment. Short of doing that, there is always the danger that the politicians could vote to bring back the income tax at a later date. Then we'd have a high sales tax and an income tax, which would put us in a worse spot then we are now. So while the FairTax is a fantastic plan in principle, it will only be good as long as we can manage to keep fiscally conservative Republicans in power, because the instant big government liberals take over, they would begin rebuilding all of the bureaucracy that the FairTax tears down.
The FairTax crusaders, led by Neil Boortz, are slowly convincing more and more in the Republican party, and even a few in the Democratic party, that this plan is the right thing to do. Once they succeed in getting enough politicians on their side, the plan will become law, and the great FairTax experiment will begin.
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While many who are invested in the current income tax system seek to demagog the well-researched FairTax plan, FairTax's theoretical underpinnings have been professionally reviewed, and its acceptance in the professional / academic community continues to grow.
Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown, because of the hidden aspects of the current system that make political accountability impossible. Tom Frey, of the DiVinci Institute, foresees the coming collapse of the income tax system.
Here is why the FairTax MUST replace the income tax. It's:
• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, loophole free and everyone pays their share
• LOW TAX RATE, achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards, rather than penalizes, work and productivity
Its benefits are as follows:
For INDIVIDUALS:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" for taxes payable on monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates
For BUSINESSES:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets
For the COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie" increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow
It's well past time to scrap the tax code and pay for government the way that America's working men and women are paid - when something is sold.
(Permission is granted to reproduce in whole or part. - Ian)
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