Do you want a simple tax system that will eliminate the IRS as well as income, capital gains, payroll, estate, gift, social security, Medicare and Medicaid taxes, and give you the power to pay taxes how you see fit?
How about one that will not disenfranchise the poor or overburden the wealthy? How about a tax system that is completely constitutional, creates jobs and will double the size of the U.S. economy in less than 15 years? I’m not arguing about race, poor versus rich or left versus right. I’m going present to you a tax system that will satisfy all, and make America more prosperous than ever before.
“FairTax” and the information presented in this column were presented to me in “The Fair Tax Book,” written by former Rep. John Linder and talk show host Neal Boortz. The book has insight beyond our current tax system and its method was introduced in a bill to Congress (H.R. 25 in the House, and S. 25 in the Senate) in 1999. It has been reintroduced every year since.
Our current tax system is derived from the 16th Amendment, which is used with very ill intentions. It is manipulated by lobbyists and congressmen for personal gain.
Technically, under the current system, only 52 percent of all income earners pay 100 percent of income taxes. Congressmen use this tax system to create class warfare by telling certain constituents they will get a tax break if they vote for them. Plus, they appease certain powerful corporations that will fund their campaigns if they promise to give them tax breaks. Even those who think they are getting away with not having to pay income taxes still pay what is called an embedded tax.
Corporate taxes are just a way for the government to disguise how much we are paying in taxes, and a way to tax those who don’t technically pay income taxes. Corporations unfairly pass taxes down to the consumer by embedding them in their products, also known as an embedded tax. Essentially, an embedded tax is a tax that you pay when you buy any consumer item and thus freeing the corporation from the taxes they are supposed to pay by forwarding them on to you.
Take a bag of cookies, for example. A bag of cookies needs ingredients, and those who produce the ingredients pay taxes. So do those who ship the ingredients, those who make the trucks, those who produce the gas for the trucks, the company that sells the cookies … You get the point. Guess who all these taxes are passed on to? You, the consumer.
On average, 22 percent of what you pay for in a consumer item goes to the government. According to Harvard economics professor Dale Jorgenson, this money covers all of those taxes passed on to you. Add that to income tax, not to mention social security and Medicare taxes, and you are paying the government more than your fair share of taxes.
Now, the FairTax would do away with income taxes and, in turn, embedded taxes. Companies would no longer have to keep their prices high to compensate for the taxes they have to pay. How do I know this? Because if businesses would like to cash in on the extra money, simple economics would prevail through what is called underpricing.
If one company tries to keep prices high to cash in on the extra money without an embedded tax, other companies will under price them to appeal to a wider audience. This will drive prices down approximately 22 percent.
However, we all know that a government can’t run on air. So, what exactly is the FairTax? It’s a 23 percent “inclusive” federal consumption tax on all goods levied at the retail level – once and only once. A 23 percent “inclusive” tax would mean that a $100 good would cost the consumer $130. Why? If a manufacturer wants $100 for its product, they must charge $130 in order to pay 23 percent to the government.
The price you see on the sales tag is the price you will pay (excluding state sales taxes). Essentially, 23 percent of that price will go to the government. This may seem high, but remember you no longer have a 22 percent embedded tax and you are taking home your whole paycheck without your income being taxed.
What about the poor, you ask? Don’t worry. The FairTax has what is called a prebate. A prebate in the form of a check would be sent to a family or individual every month based on poverty level analysis done every year.
This prebate would cover the taxes on all goods considered the necessities of life such as food, gas and clothing. So, all their money could be spent up to the poverty level tax free. Yet, this doesn’t just apply to only the poor, it applies to the rich and poor alike. It covers everyone to the poverty line, which makes the tax progressive and completely fair.
Along with not unfairly taxing anyone, this tax will also create jobs by bringing businesses to America. Imagine a tax system that doesn’t force companies to pay outrageous taxes which make businesses go overseas. America’s current system does exactly that, but the FairTax won’t.
After the FairTax is enacted, companies can minimize costs and produce goods in America, which will be the only country in the world to not have a tax resembling corporate or income tax. Essentially, America would become a tax haven. All of those who move to America will be paying into our tax system for purchased goods, contributing to this great country.
As a nation, we spend $500 billion just trying to figure out how to file our taxes. That’s 18 percent of our GDP. The FairTax would do away with that. Those who get away with not paying any taxes, including illegal immigrants and drug traffickers will have to pay taxes on the goods they buy. It broadens the tax base without hurting the poor, or targeting the rich.
So, as the economy grows and the wealth of this nation increases, so will the number of eligible consumers. In turn, this leads to more goods being purchased, and more taxes being paid. Yet, you won’t see anyone complaining because they get to choose how they are taxed. It is estimated that our economy would grow by 10.5 percent in the first year of FairTax alone.
In the end, you, the consumer, will be able to pay taxes how you want to. What other tax plan can grant the United States of America the ability to fund every program they have now – including social security and Medicare – while increasing the size of our economy and creating jobs?
I encourage you to go to fairtax.org and read “The FairTax Book” by Boortz and Linder. You will not regret a single word you read. Simply put, the FairTax is more American than apple pie and football. It’s a no-brainer.