November 26, 2010


Arguments for the Fair Tax

by Nori
Categories: Economics, Government, Politics, Taxing the American Public, Wising up
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I have long been a supporter of the Fair Tax.  I think it will do tremendous things for our country.  What frustrates me about the Fair Tax is the way I hear it described.  Instead of listing the key points of the Fair Tax, they muddy the water.  That is SO not helpful.

The Fair Tax is really very simple.  Income, payroll, inheritance and gift taxes go away.  Instead of being penalized for making money, hiring employees, inheriting money or being gifted money, residents of this fair nation would be taxed on how they SPEND their money.

Put another way, you can make all the money you want and the government will not stick their hand in your pocket for their perceived share.  If, however, you buy that new BMW or luxury yacht, you’ll pay tax to the government.  Get a custom house built or buy a new house?  Yeah, you’re gonna fork over.  Buy a used car, used house, used boat?  You don’t pay.  The Fair Tax encourages frugality and thrift.  It encourages companies to do business by removing the road blocks the tax code imposes on them.

If you’re wondering how the government can afford to function when they don’t have their hand on your paycheck/inheritance/etc., don’t worry.  The Fair Tax is a “revenue neutral” plan.  That means the government will get just as much money as the current grotesquely complicated tax plan, but it will just do it with much less overhead.  The Internal Revenue Service agency will be drastically reduced in size, possibly saving as much as a billion dollars over the current tax code.  The amount of money saved by businesses and private individuals is enormous, in excess of what the change in tax code will save the government.

Just so we’re clear, if it’s a Federal Government tax on anyone or anything, it’s going away.  The change in tax code will remove the need for an agency to enforce our current massively complicated tax code.  The mechanism for collecting tax is hugely simplified and is transferred to the Treasury.

So here’s the goal of the Fair Tax, “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.”

Here are the reasons I support the Fair Tax.

Congress finds the Federal income tax–

  • retards economic growth and has reduced the standard of living of the American public;
  • impedes the international competitiveness of United States industry;
  • reduces savings and investment in the United States by taxing income multiple times;
  • slows the capital formation necessary for real wages to steadily increase;
  • lowers productivity;
  • imposes unacceptable and unnecessary administrative and compliance costs on individual and business taxpayers;
  • is unfair and inequitable;
  • unnecessarily intrudes upon the privacy and civil rights of United States citizens;
  • hides the true cost of government by embedding taxes in the costs of everything Americans buy;
  • is not being complied with at satisfactory levels and therefore raises the tax burden on law abiding citizens; and
  • impedes upward social mobility.

Congress finds further that the Social Security and Medicare payroll taxes and self-employment taxes–

  • raise the cost of employment;
  • destroy jobs and cause unemployment; and
  • have a disproportionately adverse impact on lower income Americans.

Congress finds further that the Federal estate and gift taxes–

  • force family businesses and farms to be sold by the family to pay such taxes;
  • discourage capital formation and entrepreneurship;
  • foster the continued dominance of large enterprises over small family-owned companies and farms; and
  • impose unacceptably high tax planning costs on small businesses and farms.

Congress finds further that a broad-based national sales tax on goods and services purchased for final consumption–

  • is similar in many respects to the sales and use taxes in place in 45 of the 50 States;
  • will promote savings and investment;
  • will promote fairness;
  • will promote economic growth;
  • will raise the standard of living;
  • will increase investment;
  • will enhance productivity and international competitiveness;
  • will reduce administrative burdens on the American taxpayer;
  • will improve upward social mobility; and
  • will respect the privacy interests and civil rights of taxpayers.

Congressional Findings Relating to Administration of National Sales Tax–

  • most of the practical experience administering sales taxes is found at the State governmental level;
  • it is desirable to harmonize Federal and State collection and enforcement efforts to the maximum extent possible;
  • it is sound tax administration policy to foster administration and collection of the Federal sales tax at the State level in return for a reasonable administration fee to the States; and
  • businesses that must collect and remit taxes should receive reasonable compensation for the cost of doing so.

Congressional Findings Relating to Repeal of Present Federal Tax System- Congress further finds that the 16th amendment to the United States Constitution should be repealed.

Works for me!  Let’s repeal the 16th Amendment and get Fair Tax working for us.