| A
new fair tax plan to sweep nation? |
We
are currently witnessing a lot of new trends taking hold
in our nation’s body politic, some interesting and
innovative, some downright bizarre.
As an example of the latter, I’m still not quite sure
what to make of the California recall election. I’m
still somewhat skeptical of the whole situation that just
transpired in the Golden State. Mr. Schwarzenegger made
some great movies but we all must wait and see how he can
handle a job based in reality.
In terms of positive, interesting new political ideas that
could bear watching, I call your attention to the “FairTax”
plan, a consumption tax designed to replace the entire federal
income tax system, including personal, payroll, corporate,
self-employment, capital gains, gift and inheritance taxes.
The FairTax could allow Americans to take home a full 100%
of their paycheck. No income taxes or payroll taxes would
be withheld from an individual’s paycheck, pension,
or Social Security check.
The idea of the FairTax was brought to national attention
by Representative Linder from Georgia through bill number
H.R. 25 which is in the U.S. House of Representatives’
Ways and Means Committee. As of a few months ago, the entire
Georgia congressional delegation was supporting the bill
and the Secretary of Commerce is behind it, as well. Popular
national talk show host Neal Boortz has also made the FairTax
a pet cause, giving it further attention.
So, what would this FairTax idea mean if ultimately successful?
I’m not Milton Friedman by any stretch of the imagination,
but it could spell the weakening, or outright demise, of
the Internal Revenue System as we now know it.
The FairTax act would abolish the federal income tax system.
If this were to happen, proponents say that prices will
drop 20 to 30%, since hidden income taxes currently make
up some 20 to 30% of all retail prices. The proposed FairTax
rate is 23%. So, instead of paying 15.3% of your paycheck
in payroll taxes, plus an average of 28% of it in federal
income taxes (for a total of about 43% of your paycheck
going to the federal government in Washington), you would
pay only a 23% consumption tax each time a purchase is made
of a new good or service for your own personal consumption
above the federal poverty level.
Therefore, with the FairTax, if you buy any new good or
service for yourself, a consumption tax of 23% will be added
to the price. At this rate, the FairTax will pay for all
current government operations, including Social Security
and Meidcare. With such a tax in place, government revenues
will be more stable than they are now because consumption
is usually more constant than income.
Interestingly enough, with the FairTax plan, if you choose
to buy used items, such as a car or home, you do not pay
the consumption tax. Or, in your business, if you buy an
item strictly for business purposes, you pay no consumption
tax. So, in effect, you choose whether or not you pay the
consumption tax based on your purchase decisions.
To
ensure that no American will pay a tax on necessities, the
FairTax plan also provides a pre-paid, monthly rebate for
every registered household to cover the 23% consumption
tax spent on necessities up to the federal poverty level.
This is how the FairTax will completely un-tax the poor
and lower everyone else’s tax burden. Life will then
be freer and fairer, advocates say.
On first examination, I like the plan. Anything to simplify
the draconian tax laws in place and tame the IRS would be
an improvement in my book. While some argue that any tax
is still unfair, the fact is taxes will probably be with
us for a long, long time. At least until the second American
Revolution. While we wait, the FairTax plan may be a strong,
fiscally responsible stop gap to the tax hemorrhaging taking
place in our nation today. Your comments, as always, are
welcome and encouraged. DBJ
Scott
Coopwood
Publisher
