Fairtax - Part I

If you watched any coverage of the Tea Parties, you would have noticed that there were a lot of "Fairtax" signs in the crowd. Tea Parties and Fairtax have an important idea in common; they both are grass roots efforts to drastically change the way things are done in Washington. The Tea Parties want to insure that the concerns of the citizens of our country are being addressed by the people in the government who were elected to do just that. Power to the people!! Fairtax would completely change the way revenue is collected by the government, and this is monumental. Here are a few highlights of the Fairtax plan. It would completely replace the entire income tax collection system, and would actually repeal the 16th Amendment, which allows the govenment to tax income. Under Fairtax, a simple percentage amount would be included in the price of all goods and services that are sold. This percentage amount would be calculated every year, based on current data. Figures for 2006 put this amount at 23%, based on what it would take to generate the same amount of revenue the government was taking in at that time with the current system. Now, this, taken in isolation, sounds like a large amount, but consider that everything you buy has about 22% (same year figures) of tax costs embedded in the price of the item or service that would disappear. Almost a trade-off. So, what about the poor people, who would now have to pay tax on food and other things that are now exempted? This is handled by a feature in the Fairtax called the "Prebate". A formula will be developed to determine what the poverty level is for the period, and the amount of the Fairtax that would be spent by a family unit earning at that income level. This amount would be pre-bated in the form of a monthly check sent to the family which, in effect, pays the tax for them. A check in this amount would be sent to everyone, rich and poor alike, with no favoritism. After all, it is Fairtax. That is about all I'll tell you about the nuts and bolts for now. I just wanted to capture your interest.
But, there are a couple of things about Fairtax that are worth considering. Without the high corporate taxes (that will have been repealed), our businesses would be in a better position to compete in the world market. We would go from a country with the second highest corporate costs to one with the lowest in the world. Companies that have moved out of the U.S. to avoid the high taxes would now want to move back home. Foreign companies would want to set up their businesses here to take advantage of our tax system. The trillions of dollars that are now hidden in offshore accounts could now be integrated into our economy because with no income tax, there would be no reason to hide the income. It is fair in another way - the rich will pay more because they spend more; the poor will pay less because they spend less. In a sense, you get to decide how much tax you want to pay. Don't forget all the people who don't report their income now, like criminals, drug dealers, or illegal aliens who work for cash. Under Fairtax, they would be paying their fair share every time they spent their ill-gotten gains. And above all - there will be no more IRS and no more income tax to file. April 15th will be just another nice spring day.
Don't expect politicians and lobbyists to just roll over and let their golden egg be taken from them. The current tax code is what they use to gain advantages and grant favors, and they use it incessantly. How else could it have grown to almost 70,000 pages?
Fairtax is not new. Years ago, a group of experts from several walks of life started out with a blank slate and a mandate to create a tax system that would be fair to everyone, easy to administer, and simple to execute. They came up with Fairtax. It was first introduced as a bill in the House and the Senate in 1999, and has been re-introduced every year since. Each year it gets more co-sponsors as legislators come on board, but it still has a long way to go. As I said, our elected officials aren't really interested in changing the law at this time. I really think we citizens need to find out all we can about Fairtax and then pressure our representatives in Washington to get on the bandwagon. I wrote to Sen. Ben Nelson and he wrote back with an answer that said two things; he was against it, and he hadn't read the bill. I used to like him.