Well, after only three posts, the Random Crusader has had a reader request to opine on the subject of the Fair Tax. While passingly familiar with the concept, RC (that's me) decided to actually do some research to determine his actual position on the "Fair Tax" and frankly, I wouldn't have started a blog had I not wanted to inflict my opinion on others. :)
To research, I went to the best place for it,
http://www.fairtax.org/site/PageServer?pagename=about_main.
Here are the basics for their proposal:
End payroll taxes
Get rid of the IRS
Repeal the 16th Amendment (effectively ending income tax)
Institute a 23% National sales tax on goods and services
If I may wander into Left Field for a moment (metaphorically not politically), I hate the use of the word "Fair" to describe some sort of notion of equity. It is a completely subjective term since what is "fair" to me is not necessarily "fair" to you or anyone else for that matter. Fair should be relegated to its proper place describing that annual festival of mildly thrilling rides, acres of greasy, sugary food, 4H students showing off their cattle and everyone's aunt or grandma showing up with her 'world famous' pie. It can also be used to describe one's physical/mental condition. So I would prefer it if this group were to call it The Just Tax (if taxes can be considered just). Ok, I feel better now.
The chief argument against the Fair Tax is that the consumption tax - which is what a sales tax ultimately is - is regressive as it hits lower income people harder than higher income people. I tend to agree with that assessment. So the Fair Taxers countered by - surprise, surprise - tiering the Fair Tax. Basically, people making under a certain income would get an exemption or refund from the tax (which I'm guessing would require a federal agency to administer and keep records so we'd have IRS light). I like the idea of abolishing the 16th Amendment (anything to undo what Woodrow Wilson did to us) and the IRS but I don't see that happening. You can visit the site if you want to see all of their arguments and refutations of critics. I don't like the idea of a national sales tax any more than I do the current system. Trips to Canada and a couple weeks in England will turn you off to the NST or VAT(value added tax) idea.
The Fair Taxers and Flat Taxers, though not exactly friendly toward one another all the time are allied in a greater war against leftist "Progressives" who just keep taking more and more money from our pockets. The underlying question in that war is or should be: What is the purpose of taxation? The left and Barry - the Kenyan Kalamity - Obama in particular make it clear that they believe the purpose of taxes is to redistribute wealth as if they are some sort of modern Robin Hood (who actually stole from the BAD and gave to the GOOD rather than from the rich to give to the poor). Hey Barry, Harry, Nancy; this isn't 12th century England and the three of you combined aren't worthy of touching a longbow (between them, they seem more like Prince John, Guy of Gisbourne, and the Sheriff)! Of course sensible people will tell you that the purpose of taxation as written in the Constitution (you might remember that bit of tattered parchment) is to bring revenue into the Treasury to pay for legitimate government expenses. Revolutionary isn't it?
What I propose is radical, it will be painful for some, especially the poorest Americans (who are still far richer than the poor of most other nations), and it would take a few miracles to get it all done.
1. Before we do anything else, we must change the way the IRS operates. It is currently the only place in America where the accused is guilty until proven innocent. The rules of the IRS should be changed so that the onus is on them to prove that you are guilty of attempting to defraud the government of funds. If they cannot, you simply owe the amount of back taxes you missed no interest or penalties.
2. This is the tough one but several states are already working on getting the 10th Amendment (States Rights) back into its rightful place. The more we can undo the "Progressive" agenda of centralized planning at the Federal level the easier it will be to restore the balance of power between the Federal, state, and local governments.
3. Push an amendment to the Constitution that limits the Federal budget to 10% of GDP (the government currently consumes 28% of the American GDP and for every dollar it spends, only $0.80 are returned to the economy whereas every cent of private money spent is returned to the economy) except in times of declared war and all revenues above the limit must go only to military spending. Once the war is over, the next year's budget must return to 10% GDP. Why 10%? Well, our God only asks that much from us so our petty potentates in DC shouldn't ask more.
4. Make the tax rate level across all income levels and for all people. No more exceptions. Even the poorest people must pay 'their fair share' (there's that word again). That might seem harsh to those of you making $10,000/year but everyone should be invested in the system. When one group is relieved of the burden of taxes for any reason other than having zero income there will be incentive for many to get into that group. There will be incentive to expand eligibility for that exempted group. There will be incentive for that group to shift the extra burden onto the non-exempted group. This is readily visible today in the 50% of American adults who pay a net zero income tax yet continue to vote for and support politicians who play on class warfare.
5. End unfunded federal mandates and begin dismantling the alphabet soup agencies. Tops on the list should be the Department of Education. In western states with large 'national' forests or government held lands, the government should start whittling away those agencies and turn the land over to the states. NPR and the Corporation for public broadcasting, both left leaning in their outlooks should be disbanded. Their programming will have to succeed or fail in the competitive world just like any other show. With the IRS's teeth knocked out, it will wither on the vine itself.
6. Eliminate all public employee unions.
In the end, I am not in favor of the Fair Tax mainly because the first thing its supporters did was to exempt a group and turn it into a graduated system. Without a Constitutional Amendment limiting government's confiscation of our income, the pols in DC will simply raise the national sales tax at their whim in dead of the night sessions or slipping raises into 1000 page bills (hmm...sounds vaguely familiar) just as they do now. Limiting the federal government to a percentage of GDP through the Amendment process will make it more difficult to sneak money out of our pockets. Of course they will find a way to circumvent even that if we are not vigilant anyway.
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You make some great arguments. It has always perplexed me that the Fair Taxers want an exempt class and tiered taxing. For me that is too much like what we already have.
ReplyDeleteGood Job! Keep up the great work!!
The FairTax does not have an exempt class and tiered taxing. A 23% consumption tax will be charged on all new goods and services. The only thing not taxed are used products and college tuitions.
ReplyDeleteAt the beginning of each month a tax prebate will be sent to all families (that is families of legal citizens). The prebate is determined by taking the tax rate of 23% times the current poverty level for each size family. As I said EVERY legal family will receive this prebate. If your family earns poverty level or less,the prebate would completely untax your family. For example the current annual,poverty level income the current poverty level for a family of four is a little $29,000 annually. This means every family of four would receive a prebate check for approximately $555 each month.
This makes the FairTax progressive not regressive.
To add to the above post, no business inputs are taxed either. Taxing businesses is just another way of hiding the cost of government.
ReplyDeleteYou seem to be concerned with personal freedom and visibilty/accountability of government. So here are a few other thoughts to ponder.
The greatest two reasons I personally support the FairTax, is it enhances individual freedom compared to any tax on income and it moves the cost of government (taxation) from the front of your income where it is hidden from most to the end of your consumption where it is visibly and equally seen by all under the bright lights of the cash register.
Only with this visibility can you have accountability. The beauty of the prebate is it is visible too. This means that EVERY American is effectively untaxed to the poverty level (treated equally), but EVERY American will also see the cost of government from the first dollar of consumption (treated equally).
That might leave one question. How will the government know the size of the family? To receive the prebate, you must complete a once a year certification form that 1) lists the family members, 2) includes valid social security numbers and 3) certifies that all members of your family are LEGAL residents or citizens. Completion of the form is voluntary. Without completion, you just won't receive the prebate. For some, privacy is more important than the prebate.
The FairTax will lead to a voluntary Social Security benefit as well. Today, the government gets its funding for Social Security based on wages and uses (borrows) those funds towards general funding. This means payment into SS and Medicaree must be forced.
Under the FairTax, SS and Medicare are built into the sales tax rate and collected as citiznes make voluntary purchases. Wages will still be reported to the Social Security Administration, but only for the purpose of determining the benefit you will be receiving. Since payment of benefits only remove money from the Federal Treasury, I can't imagine them telling American "You must complete this form and take this money from us." Again, I personally feel many Americans will value privacy over receipt of a small check from Government.
In item #2, you mention state rights. The FairTax will be collected by the states and then sent to the US Treasury. The states and retailers will retain 1/4 of 1% for their efforts.
Today, the Feds collect most of the revenue and hold it above the heads of the state/local government offering some back with strings. Under the FairTax, the states will have the money in hand first and be sending it to the Feds. In my own opinion, this will lead the states to wonder why they are forwarding it to the feds to have to ask for it back with strings attached.
Good try, RC, but you missed several points and had several misunderstandings. As anonymous pointed out there is no tiered taxes. All American citizens get the prebate. An important concept missing from your limited analysis is the existence under the current system of a hidden tax of at least 10% on everything we buy. How is that for regressive? Don't forget the FICA/Medicare and Social Security taxes on every dollar we earn (at least up to some level, but on every dollar of ordinary wage earners). How is that for regressive? The Value Added Tax (VAT) which is getting considerable attention in Washington is another hidden tax and should not be compared with the FairTax, which is visible to everyone, and, most importantly, takes power from Congress and gives it back to the people.
ReplyDeleteI keep seeing in the comments that there is no tiered tax, however if the prebate is paid to everyone including those who don't pay enough to cover the prebate how is that not tiered? You have at least two tiers those who end up with a net payment and those who end up with a net of zero.
ReplyDelete