Is the Fair Tax really fair?
Oct 15th, 2009 | By Kris | Category: All Content, Finance, Politics
You might know a little about the Fair Tax. You might not. Whatever the case may be, The Fair Tax has gained steam in the past two years. Today I’d like to take a look at this notion that the Fair Tax is, indeed, fair.
The Fair Tax is officially called H.R. 25. If you want to know the Wikipedia synopsis, take a look here. Up until this point the Fair Tax has largely been supported by only Conservatives, which may be why the idea is still foreign to a large number of people. The idea was first proposed in 1999 by Congressman John Linder. It has been growing ever since and was examined more thoroughly during the primaries leading up to the 2008 Presidential election. Without going into every little detail about the Fair Tax, I thought I would make a very condensed list of pros and cons as the experts see it and let you do the research. If you’re up to it.
Some Pros. First, the current tax code in its entirety would be abolished. The 133-page H.R.25 bill would replace it. This is substantial because the current tax code has become increasingly difficult to read, understand, or make sense of. As U.S. Representative Rob Portman writes
“The income tax code and its associated regulations contain almost 5.6 million words — seven times as many words as the Bible. Taxpayers now spend about 5.4 billion hours a year trying to comply with 2,500 pages of tax laws….”
Second, you would see a full paycheck. Many Americans fail to realize that their paychecks are actually for more than the amount that gets deposited into the bank. The average American has 20-30% of their paycheck decreased before they even see it. That means that your money is taken from you before you even get it. To put that in dollar sense; instead of receiving, say, $1500 every two weeks you would begin to get a check for $1800 minimum. What could you do with an extra $600 a month in your pocket? Third, no more filing taxes. April is a month of horrors for many of us Americans. Getting receipts together, itemizing everything so you don’t have to overpay on your taxes, filling out forms, spending hours and hours on the phone with the IRS. No more. In fact, no more IRS at all. Fourth, any individual (citizen or non-citizen) that makes a purchase in the United States contributes to our tax burden. This helps ease the raging debate going on regarding illegal aliens and a “lack of contribution.” Lastly, abolishment of the IRS affects more than just income taxes. No more taxes on savings, investments, tuition expenses, and more. No more payroll taxes for companies. This means that they will not pass their taxes onto you. See, when a company is taxed at a higher rate, they pass those taxes onto the consumer. It manifests itself in smaller portions of the same item for a higher prize. Companies are smart. Why pay the taxes themselves when they can just increase the price of their product?
As supporters have their list of pros (much longer and comprehensive than what is outlined above) opponents of the Fair Tax are sure to have their cons. First, the national sales tax would be increased to 23%. Second, the wealthy would pay the same tax percentage as the poor. The tax burden you have is directly related to the purchases you make. Third, with the abolishment of the IRS comes an initial loss of jobs. Those holding a job with the IRS would be seeking new employment. And lastly, the fair tax does not address the reason for high rates of taxation: government spending. Our taxes directly finance the national budget. Some believe that the taxes collected by the Fair Tax won’t be enough to cover our costs.
Whatever your position on the matter may be, I challenge you to research H.R. 25. Also, if you happen to be a supporter of the Fair Tax, I challenge you to address the cons and any other popular con of this bill here in this blog. Likewise, if you are against the fair tax perhaps you can address some of the pros listed above. Whatever the case may be, with this idea gaining popularity, we owe it to ourselves to know what we are up against. I think the question that should be asked is, “Is our current tax code sufficient?” Or better yet, “Is our current tax code efficient?”
What do you think? Is the Fair tax really fair?
(Also, check out this follow up article “The Immorality of the Income Tax”)
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Great article Kris — very thought provoking.
I support the fair tax!
How come?
i’m down with it, seems very fair, and anything to get rid of the IRS is cool with me. only problem i can see with it other than having to hear neal boortz say “told ya so” is that there will be people who still figure out how to get around paying taxes. helloooooooooo black market!! so then you’d have to charge someone with tax evasion or even treason who opens up the “duty free” shop on the block (you KNOW this would happen)….even funnier…this sounds like a win win situation to me. thumbs up on the fair tax.
Cause I’ll get a full paycheck. :)
I want to chose when my money will be spent.
Jason, LOL.
I love it simply because it gets rid of the income tax all together. Its better to start over than give government more control by confusing the hell out of everyone!
but, honestly, why taxes? I read in Ron Paul’s book that if we simply cut back spending to the way it was in 1997, then their wouldn’t be any need for taxes PERIOD. Of course, that’s one of those missing information quotes. I can look it up for us though if need. Either way, Instead of assuming all people and their God-given lives deserve to pay taxes, think how we could get it to where we don’t! doesn’t that sound like a better goal? That would be a great platform for a president to stand on.
E-Verify should be on the national agenda to countermand any illegal alien infiltration into the working environment. Whatever needs to done should take priority to remove the unauthorized labor in our jobless nation. More funding, more modifications until the illegal immigrant fraudulent use of documentation becomes a thing of the past. Using whatever technical programming that is available, to make it’s operation inadvisable? Any database including state criminal, FBI, Social Security, Homeland Security, and any other means possible. Ultimately the final version would contribute photo verification, national ID system with biometric data which has been recommended by the Brooking’s Institute and Duke University MIT. Supposedly small employers who don’t operate computers should have common access in such locations as Post Offices or other approachable government building to identify the workers they are hiring.
There should be no excuse to not install a nationwide mandatory system of worker identification. My suggestion is that–ALL-I-9’s should be copied and a duplicates sent to a Homeland Security Clearing House? Creating such an office would be a simple affair, if our state and federal government would be more beneficial to the working American male and female. If our government is sincere in securing our borders, and introducing new immigration enforcement tools, then E-Verify will become the final deterrent and not be weakened by Sen Harry Reid and his administration. I have made a point of speaking to a few business human resources departments, and found most are enthusiastic about the use of Verify. Only 1 of the 6 companies that I investigated determined some false negatives” and “false positives. But they always have a backup system of contacting the Social Security agency nearest to them, until the irregularities are resolved. Most immigration enforcement laws that have survived, such as 287 (g), is under attack, including the ICE raids. They have already silently rescinded the No-Match-Letter and other indicators show that the parties have many pro-illegal immigrant legislators amongst them?
All that remains is citizens and legal residents to stop the Obama people from throwing a wrench in the cogs and stopping any technological advancement with E-Verify. E-Verify can be used on a universal level in checking bogus drivers license applications, auto insurance, home purchase, health care and other personal data. It would certainly alleviate the kidnapping of social service programs by the 20 to 30 illegal immigrants in America. It would displace foreign nationals so down-trodden legal single mums with children, homeless vets, senior citizens and even students could get employment. It all depends on all of us to contact our Representative in Washington at 202-224-3121. Tell them you don’t want half measures by full permanent implementation? NO MORE DRAGGING THEIR FEET? Tell them your remember them on next election day. YOU ALSO WANT TO COMMAND THEM. NO MORE AMNESTIES.
Don’t let them distract you, but repeat your demands without hesitation to these open border jerks. Invest a little time and check what your politicians are doing to our immigration enforcement safeguard at NUMBERSUSA. Read about the consequences of future OVERPOPULATION at CAPSWEB and our collapsing infrastructure, that has been ignored for decades nationwide. Last read factual information at JUDICIAL WATCH that discloses the lawmakers, that are running the country for themselves, friends and business associates. ITS ALL FREE. Read that some of the White House Czars are not true Democrats, but are shadowed by their past Liberal Marxist backgrounds.
Hey Brittanicus,
I don’t know if I follow your comment. can you simplify it?
Yes, the Fair Tax is fair, but what will we do when people stop spending. People are greedy, they will save their cash, not buy legally, spend it oversees for cheaper goods that are not taxed.
There is not really a whole lot, in my opinion, to support the notion that people will stop spending.
First, the price of goods won’t go up much, if at all. Sure, the sales tax will be higher. But there are already plenty of embedded taxes in goods that we purchase today. Companies pass on their taxes to customers through the sales price of their goods.
Second, economists call it the “income effect.” Essentially, when one has more money in their pockets, they are more apt to increase their demand of commodities.
Third, while there may be a faction of people who attempt to add to their nest egg, American’s have proven that we are not the best spenders. That is what got us into this whole economic crisis to begin with. People spend more money than they have.
And as far as buying illegally or overseas, that remains to be determined. There would definitely be a black market as Jason earlier suggested, but second hand items are not taxed under the fair tax. If you are a person selling an item, such as a used car, the taxes have already been paid on those items and you, and a second buyer, would pay no taxes on that item. There may be a black market for newer items, but I’m not certain that it would negatively impact GDP.
[...] This is a follow up article to Kris’ “Is the Fair Tax really fair?” [...]
The Fair Tax will be an inclusive tax, so when you hear the opponents say it’s a 23% tax increase, they’re wrong. Also, most of the politicians in power now are opposed to it because it gives the power back to be people. If a majority of Americans do not support the current administration or Congress, they can choose not to spend in protest of the out of control spending. This would cause the politicians to cut programs and cut spending because their budget would be out of whack because of the lack of revenue. I believe this is the main reason why it is not taken seriously on the floor of the House when John Linder wants to bring it up for a vote.
Funny thing is, the Democrats can still punish success by passing the Fair Tax because the rich will still be paying the highest taxes because they spend the most.
Matty, thanks for pointing that out. I think people get really scared by that 23% (it originally kept me from supporting the Fairtax until I read more about it).
It is important to note that the 23% is comprised of many of the embedded costs that we already pay for under the current tax system. One proponent of the Fairtax said that there would be no real increase in the cost of goods, because companies will be able to revert back to lower competitive pricing now that they will not have to pay payroll taxes.
To democrats, it is not about punishing success … it is about losing control. As you said, giving back “power to the people.” That is a dangerous notion. It is the objective of Big Government to limit the voice of its people.
There is a reason the colonist raised their hands and said “No More!” There is a reason they rebelled against a land that was once their home. There is a reason they, led by our founding fathers, declared themselves a sovereign nation.
That reason was TAXATION!!!
The subject of taxation and the manner in which it was to be gathered was so important that our founding fathers addressed it in the very first article of the Constitution: Art. 1 Sec. 8 and Art. 1 Sec. 9.
Art. 1 Sec. 8: Congress shall have the Power to lay and collect Taxes, Duties, Excises, and Imposts, to pay for the Debts and provide for the common Defence and general Welfare of the UnitedStates; but all Duties, Imposts and Excises shall be uniform throughout the United States;
Art. 1 Sec. 9: No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.
On February 3, 1913 Congress created the sixteenth amendment. This amendment
totally disregarded the wisdom of our forefathers and the protections they had created to protect us from a government that had become self important.
Amendment XVI: The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
What does that sound like to you? You are right! Congress said we are going to do what we want to do and don’t need your approval regardless of the foundation of our very creation: “THE CONSTITUTION”!
The sixteenth amendment is unconstitutional to the very core of the constitution.
Our present system taxes and takes funds from the worker and if the said worker works harder, it punishes them and taxes and takes more. This system takes away an individuals drive to do better, to produce more, to make a better product. Why should the individual work harder, just to be put into a higher tax bracket? Why? In our present system of taxation there are those that are said to not be putting in their fair share,(i.e., the rich, the illegals immigrants, the criminals). If there is one thing that we Americans want: it is to be treated fairly.
There is a solution to this insanity in Congress. There is a way that we Americans can regain our pride, our self drive, our incentive. That solution is in the House of Representatives and is known as House Resolution 25, The Fairtax.
“H.R. 25: The Fairtax” will abolish the Internal Revenue Service and repeal the sixteenth amendment. H.R. 25 will change the way our federal government gathers revenue from that of an “income tax” to that of a “consumption tax”. By changing over to a consumption tax rather then an income tax, whatever you earn you take home. You only pay taxes on the new products or services you purchase. You only pay taxes on what you consume. We Americans are a nation of consumers. We like our toys. You put more money in our pocket by not taxing us to death and we will spend it.
“H.R. 25: The Fairtax” is not only what our country needs. It is right and totally constitutional. It is an indirect tax. If you do not want to pay the tax you do not buy the product. There are no loopholes for those with lawyers to find a way to not pay their fair share. Lobbyist, in Capitol Hill, bargaining for the wants of their clients will be a thing of the past. April 15th will return to being just the middle of the month. Everyone will pay their share. Citizens, resident aliens, illegal immigrants, criminals, and not only that tourists will be providing funds for our government.
Thank you for your time
Ron Coon
Santa Clara
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