This guy makes a great deal of sense, especially about how a Fair Tax would require the repeal of the 16th to keep us from being taxed on Sales and Income.
I like the idea of moving to a Flat Tax until the 16th can be repealed, then moving to the Fair Tax.
What do you think?
Their is a common misconception that the FairTax would allow for there to be dual taxation, but that simply isn't the case. If you'll read HR25 or S1025 (the FairTax legislation) you'll find that they call for the abolishment of Subtitle A of the Internal Revenue Code, which eliminates Income and Self Employment Taxes. It also calls for the abolishment of Subtitle B (Estate and Gift Taxes), and C (Payroll Taxes and the employer Withholding of Taxes), and gives (what's left of) the IRS only 3 years to collect all uncollected taxes. What that means is that from the date of enactment, employers will no longer be able to withhold any federal taxes from their employees paychecks, nor with they, or anyone else have to file a W-2, W-4, 1099, or any of the other mountains of federal income tax forms. Now, don't misunderstand, I would love nothing more than to see the 16th Amendment abolished, but we have to have something in place and working before that can happen.
The difference between the FairTax and a flat tax is that if we have a flat tax, you can't get rid of the 16th Amendment, because the 16th Amendment is the instrument by which a flat tax is collected. The FairTax doesn't need the 16th Amendment, because it's not an income tax, it's a consumption tax, which is in compliance with the origianal Constitution, as written and adopted in 1787.
From that time forward the government will, in it's place, have a .23% point of sale,
inclusive federal sales tax, that applies only to purchases of new items, and funds the government at it's current level. If you buy a new car, you pay the tax but if you buy a used car, you don't (the tax has already been collected on it when it was bought the first time). If you buy a new house, you pay the tax but if you buy an existing home, you don't because the tax has already been paid.
Now, the biggest objection I hear from most people who are unfamiliar with how the FairTax works is the claim that it will make new products too expensive to buy. That simply isn't the case, because when you buy something today, you're already paying those taxes, because they're built into the cost of whatever you buy. Under the FairTax, those taxes are stripped out of the cost of everything you buy, since the manufacturers, shippers, wholesalers, and retailers aren't having to jack up the cost to cover those taxes. The fact is that if something costs you $100.00 today, it's still going to cost you $100.00 under the fair tax, BUT you won't be paying it from an "after taxes" paycheck because there weren't any federal taxes withheld from your paycheck to begin with!!
The other thing is the "incusive" v "exclusive" nature of taxes. When you go to the store today and buy anything, when you get to the cash register they tack on the taxes, which are known as "exclusive taxes", so they're concerned that there'll be a 23% tax added on when you get to the register on top of any local sales taxes, and this simply isn't the case. The FairTax is an "inclusive" tax, which means that the federal sales tax is already included in the price of the items you buy, just as they are today, so if you buy a $100 toaster today, and you have a 7% sales tax, it costs you $107 to walk out of the store with it today, and it'll still cost you $107 under the FairTax.
The biggest things about the FairTax that I like (besides eliminating the IRS) are 1) it eliminates the "underground economy", and 2) it eliminates tax cheats, 3) it eliminates "loopholes", 4) it brings American business that has gone overseas to avoid taxes back to the US, and 5) the Prebate. The underground economy makes out like a bandit, because they're not paying taxes on their illegal activities. Prostitution, illegal gambling, drug dealers, and people working "under the table", like so many illegal aliens are doing are all untaxed today, but under the FairTax, they too would be paying since everything (new) that they buy would be taxed, which is projected to bring in an additional $1 TRILLION a year, and once that money starts coming in, the plan is to
reduce the 23% tax by whatever amount is necessary to fund the government at it's current level.
Tax cheating and loopholes will no longer be an issue, because there won't be any tax returns to cheat on, and no tax code for their to be loopholes in! The reason most American business's that have gone overseas did so was because of the tax structure in America. As John McCain pointed out in the debate, Ireland has an 11% corporate tax rate while we have a 35% tax rate. Why would any major corporation that had an option want to stay here when they can go to Ireland and save 24% in taxes? Now image what would happen if we adopted the FairTax, and didn't have any corporate taxes at all?? We'd have companies stacked up like cord wood trying to get into America, including FOREIGN companies, in order to take advantage of our tax system. Why do you think that Chrysler and Daimler (sp?) decided to headquarter in Germnay instead of Detroit? Taxes! They saved 14% by headquartering in Germany instead of here in the US.
The Prebate. What the prebate does is send every American (you have to be an American citizen to get the check) household a check every month to cover the basic necessities of life. Now, I've heard some call this a "redistribution" scheme, but what this really does is replace the EIC, personal exemptions, child credits, and other write-offs that everyone is
already currently getting when they file their taxes every year, and if you're NOT an American citizen, you don't get it!
Oh, and BTW, how would you like to see gasoline prices drop by $.18 a gallon tomorrow morning, and stay there? Adopt the FairTax, and the $.18 federal tax on gasoline dissapears. Do you want to protect your IRA's, 401k's and other investments from federal taxes? Adopt the FairTax, and there's no taxes taken out of them when you cash them in. Do you want to protect yourself from "capital gains" when you sell your home? Adopt the FairTax.
