Fair + Tax = FairTax

I'm not usually one to care much about Republican Debates, especially not in this field of candidates, but while catching up on the news this morning, I was struck by one issue that was dealt with at full-force last night: the FairTax.

Almost two years ago now, I read the book "FairTax" which, more than anything, is a manifesto by its authors demanding serious change in the way we collect and raise taxes in America. The authors suggest getting rid of the income tax and the IRS entirely and replacing it with a consumption based tax similar to sales tax.

At first glance, this seems odd, if not annoying. Then, when you look at the actual numbers, you get mad. FairTax means something close to a 25% sales tax on every purchase! That's criminal! It will make us all poor and destitute!

Well, maybe not.

Look at the figures, or read the book, and you begin to really understand what is currently going on with our money and taxes, and how the FairTax not only makes our tax code infinitely simpler, but it actually is more fair, and CHEAPER, while collecting the same amount of money (if not more) for the government.

Here are the figures:

• Right now, we all pay income taxes and payroll taxes and SS taxes, etc. etc. etc. Business also pay corporate taxes. The system to calculate these taxes costs the economy billions of dollars and individuals hundreds if not thousands of dollars each year. The system is no fair, places a disproportionate burden on the poor, and has HUGE loopholes.
• The FairTax system gets rid of all of this, and, instead, places a $.23 tax on every dollar spent on new goods and services.
• Without the corporate taxes that are currently in place, prices are expected, over the long-run, to fall almost 20%. This means that the change in prices of goods and services pre- and post-FairTax are nearly unchanged.
• The tax is collected in the same painless, easy way that sales taxes are currently collected.
• To ensure that the poor are not burdened by the tax, every American family is sent a pre-bate each month equal to the amount of FairTax that would be spent by their size family on goods and services up to the point of poverty. That means that the poor are essentially paying no taxes, and everyone else only pay taxes to the extent that they choose to spend disposable income.

I could go on, and on, but I won't. Read the book. Go to the website. Learn about it for yourself. Then, start lobbying our Democratic friends to support this common-sense, progressive, liberal change in our political system as well!

Comments

[Ian from Ann Arbor]

In addition, the FairTax is less regressive than the current system:

Prices AFTER FairTax would look SIMILAR to prices BEFORE FairTax - NOT 30% HIGHER - as opponents contend; competition would see to it. The FairTax rate on new items would be 29.9% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" price tag - this is the way INCOME TAX is figured (parts of the total dollar).

The effective tax rate percentages, that different income groups would pay under a FairTax consumption tax, are calculated by crediting the monthly "prebate" (rebate of tax on necessities) against all likely monthly spending of citizen families (1 member, and greater based on figures established by the Dept. of Commerce - a single person receiving ~$200/mo. A family of four receiving ~$500, in addition to family earners receiving their WHOLE paycheck). Prof.'s Kotlikoff and Rapson (10/06) have concluded,

(From study: http://snipurl.com/kotcomparetaxrates ) "...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."

Further,

(From study: http://snipurl.com/kotftmacromicro ) "...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."

There is no reasonable equity of distribution under the current INCOME tax system. What's more, the income tax code has become a tinkerer's paradise for 53% of the lobbyists who game it in Washington DC. It's a lucrative business, and the U.S. TAXPAYER pays for ALL of it in higher prices (a hidden tax which is incomprehensible to the average working person). It's well past time to scrap the tax code ( http://snipr.com/scrapthecode ) 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)