Fairtax

Today I met with two local fairtax supporters.  I was hesitant about meeting them at first, because I didn't really know the purpose of the meeting.  As it turns out, they just wanted to attach a face to a name for other proponents in the area, since there are so few of us on the west coast.

We talked about what could be done to spread the word about this legislation.  Some ideas were discarded, and some held up.  The bottom line is that there is no chance whatsoever that this legislation will be passed without mass support from the people of the United States.

I promised a long time ago to expound on my understanding of the fairtax, so here it is.  

As I read it, this legislation would eliminate federal income tax, medicare tax, social security tax, corporate income tax, capital gains tax, estate and gift tax, self-employment tax, and the alternative minimum tax.  As a result, the IRS would be disbanded and no income tax forms would need to be submitted on April 15, thus eliminating all the costs associated with that process.

In its place a national sales tax would be created that would cover the current level of income generated from the above stated taxes, estimated at 23%.  This means that every new item you purchase would have a 23% sales tax included in the price.  In this way, retail and service companies would be the only ones submitting taxes to the government, thus narrowing the source of government income and making the tracking of this income simpler.  For this inconvenience, these same companies would receive a modest payment from the government.

In order to make sure that this is a progressive tax, and not overly burdensome for the lowest income group, a prebate will be issued to every registered citizen covering the entire tax burden up to poverty level.  This means that at the BEGINNING of every month, every registered household, would receive a check from the government.  This is not a hand-out.  This is intended to cover the prospective sales tax expense for essentials.

One of the key features of the fair tax is that the sales tax would be assessed ONLY on the final product.  In other words, this is not a VAT tax.  No taxes would be assessed during the manufacturing chain that would artificially inflate the cost of producing an item.  With no corporate tax and no payroll tax to match, corporations would find the cost of doing business in the U.S. much reduced, and possibly BETTER than doing business elsewhere in the world.  This would invite business back to our country and increase employment of our own citizens.

Another key feature is that without capital gains or gift taxes, money that is being sheltered offshore to avoid being taxed can be brought back to our own banks and used to strengthen our economy.

And finally, by streamlining the areas of taxation, it will be much harder for the government to hide tax hikes or added taxes in various areas of our lives.  As it is, we pay much more than the standard tax rate that gets deducted from our paycheck, if you count all the taxes the corporations pass on to you embedded in the cost of their products.

For more information, go to the fairtax website at www.fairtax.org.  Many questions and arguments have been addressed there.  I would love to have more people look into this and discuss the pros and cons with me.  Do you know anything about this?   Leave me your comments.  I would like to see more people discussing this topic on our side of the country.