COLUMN: Time for a fairer tax

Kristi Reed

COLUMN: Time for a fairer tax

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Monday, March 15. 2010

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Back in 1999, Rep. John Linder made headlines with his FairTax proposal. Intrigued by his talking points, I did some research, made my calculations and figured out that his so-called “fair” tax would cost me more than what I was already paying in Federal income taxes.

I took the time to write Rep. Linder and expressed my concerns about his proposal. In return, I received a very polite letter in which he basically explained the FairTax was the greatest thing since sliced bread and that I would benefit tremendously from its passage.

At that point, his letter went straight to my circular file and I put the FairTax out of my head even though I agreed with Linder’s assessment that the current tax code needed to be changed.

After all, it is beyond ridiculous that Title 26 of the Code of Federal Regulations has 20 volumes comprised of thousands of pages of tax rules and regulations which the average American has absolutely no chance of fully understanding. For that matter, I doubt anyone in Congress understands it either.

What Congress does understand is that this huge and confusing tax code is a powerful tool. The ability to tap into what politicians see as an unlimited supply of money at will has created a climate of fiscal irresponsibility in Washington that simply must end.

John Linder’s FairTax may not be the answer, but it is a good place to start a serious discussion about tax reform. Though flawed and unpassable in its current form, the FairTax does have several strong points.

First, the FairTax would abolish the Internal Revenue Service and eliminate the need to file a tax return. The closer we get to April 15, the better that idea sounds. There was a time, many years ago, when I could still do paper tax returns. Then, about six years ago, I reached my breaking point. After two days of work, I found myself staring at a dining room table covered with numerous schedules, forms, instruction manuals, receipts, etc. and I was still not finished with my taxes. Now I, like millions of other Americans, must rely on tax preparation software or paid preparers in order to reduce days of work to mere hours of work.

FairTax would also eliminate all income taxes, payroll taxes, self-employment taxes, capital gains taxes, estate taxes and gift taxes. What’s not to like there? Like many people, I look at my paycheck and can almost hear the clerk in Raising Arizona saying, “Government do take a bite don’t she?” At least with a consumption based tax, I would feel as if I had some small measure of control over how much money I send the Feds each year.

There are problems with the FairTax though. The whole prebate system is a costly, bureaucratic nightmare. The proposed tax exempt expenditures are also a problem. When any exclusion exists, the door is open for other exclusions and, before you know it, you are back to 20 volumes and thousands of pages of indecipherable tax jargon.

Questions also remain about the true tax rate and its economic impact on the middle class. Until those questions are answered conclusively, building adequate public support for the plan will be difficult.

Still, the American public would benefit from a more reasonable, more fair tax plan than the one that currently exists. We may not need FairTax, but we do need a fairer tax.

Kristi Reed is a reporter for the Barrow Journal. She can be reached at kreed@barrowjournal.com.

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#1 Daar Fisher on 03/15/10 at 05:50 AM [Reply]

The point of the FairTax is to end the claims that government has on monies received. Instead, it get "theIRS" when "we get ours," (the realization of a benefit in a purchase) at the cash register. No income tax code to be gamed by 53% of the lobbyists in Washington. No income tax code to manipulate and control social and business behavior. No income tax code complexity which costs us yet more hours of our lives, and dollars from our purses, to render a "income tax return" (under threat of audit, interest, penalites, fees).

Under the current system, average non-business-owning wage-earners are prospective walking "tax deficiencies," complete with interest and penalties. FairTax reduces "points of collection" by 90%; the average wage-earner will never encounter a Revenue Agent.

Under FairTax, no more income and payroll tax on business (which is just a dishonest way of using business to collect tax, while business passes it through to us in higher prices - a hidden tax).

You state the FairTax is "flawed," yet offer no convincing evidence that any "flaw" even BEGINS to compare to the nightmare which is our present reality.

#2 R. George Dunn on 03/15/10 at 08:30 AM [Reply]

In addition to what Daar has said, the prebate program is far less cumbersome then our current system of taxation and with technology as it is, the majority will be done by computer.

Some complain the prebate is progressive and it is some, but with everyone getting the same equal amount of tax relief on necessities, it is a very fair compromise with those who are socialist in tendency and vote. The FairTax prebate is a fixed progression to providing a security blanket to all without breaking the bank.

The real gem in FairTax is it levels the manufacturing competition with imports by taking the hidden tax of 22% out of the price of domestic products, thus putting everyone back to work with a job, which in turn will produce more consumers for existing business, which will in turn create more investment and jobs. With more jobs then employees, the level of poverty will near zero out.

The current tax structure is a monster with so many evils. Daar mentioned the Lobbyists. With FairTax, the Congress will have nothing to manipulate thus Lobbyists will have to come to Congressman with ideas, not bribes to shield the rich. As to free enterprise needing tweaked, better it be self induced then by a greedy bureaucrat. Congressman will once again be loyal to their constituents then to lobbyists, especially if we change campaign finance to be donations can only come from registered voters. :o)

The largess of the Federal Government is hidden tax in product. FairTax will bring transparency to how much we pay those thieves. It will prompt the election of candidates who will adhere to constitutional conduct. FairTax is our weapon of Liberty and Freedom for this very dark hour in USA history. It will save the Constitution and our Country from falling into total oppression.

There will be a push to keep our current tax structure and just flatten out the income tax. That is the gem of those who want to continue to subvert the Constitution and grow the Federal Government into which we will be of one State and eliminate the need for the Sovereignty of the 50.

#3 Sean Teague on 03/15/10 at 03:51 PM [Reply]

Kristi, I would like for you to re-weigh your figures on the sales tax side of the FairTax. And after you consider all of the people here on a visa or not paying any income taxes at all. The FairTax is capable of producing 15-25% more revenues than the charts show, but only when you factor in the missed revenue of all the illegal or immigrant workers that only pay 7% sales tax and not one penny of income tax. This final figure can only be guessed at due to the illegal nature of paying workers in cash w/o taking out taxes. I'd like to hear some guesses of the extra revenue from these "tax dodgers", what's yours?

#4 Fair Tax Backer on 03/16/10 at 07:46 AM [Reply]

I'm so glad just to see the FairTax being debated. The more it is debated, the more word will spread. The two most important things it will do is take power away from the politicians and also, with no taxes on business, I can't even imagine the boost to our economy it would cause. Let's keep discussing it!!!

#4.1 Wheels on 03/16/10 at 07:26 PM [Reply]

Your 100% correct, the econmomy would take off like a rocket, and benefit every American, except power grabers in DC, which in the long run would be great for every American if the people could only see the truth.

#5 Mr.Parr on 03/17/10 at 08:14 AM [Reply]

Turn the U.S. into the worlds largest tax shelter nation and corporations will form a line to open up shop in America. Know what that means? JOBS! And lots of them. Take the 22% of taxes currently embedded in ALL products and impose a 24% sales tax? PLEASE! Even if the products I want and need cost me 5% more I wouldn’t be paying $900 a month in federal taxes and withholdings! I could pay ALL my bills and (via the prebate) buy my food before I pay federal taxes. There is no such animal as a perfect system of taxation but the fairtax comes damn close and it would replace the near 20,000 pages of tax law currently on file in the library of congress with 14 pages of tax code my 12 year old can understand.

#6 Mr.Parr on 03/17/10 at 08:23 AM [Reply]

The best way to fight poverty is to create an environment where there are not enough employees to meet demand (I.E. the fairtax) and then make people uncomfortable in their poverty. wouldn’t ya’ll love to open the Barrow Journal and see 5 times as many help wanted adds than are currently placed And unemployment at 2%? I know I would!

#7 Lord Kilborn on 03/17/10 at 08:27 AM [Reply]

I wish to address Kristi's concerns about the FairTax.

Her three major concerns are about the prebate, exemptions, and the middle class tax rate.

First, the prebate... currently, the US government sends in excess of 60 million checks out every month. The government is a money-sending machine already. The prebate system simply involves people submitting the social security numbers of everyone in their household to verify the number of people they will receive a prebate for. Such a system could be easily verified - if two numbers appear in two different households, simply withhold the dispersal until the right household is verified, and investigate the fraudulent household. There will be a lot of out-of-work IRS agents to handle that easy task, and that job will be rather straightforward (mail fraud). Additionally, the government could simply issue prebate "cards" and charge them appropriately at the first of every month instead of paying postage each month. It is much simpler than opponents make it sound.

Second, exemptions. The only exemptions that exist in the legislation are exemptions for investments - investments in business, investments in savings, investments in education, etc. (Note: housing purchases do not qualify.) The reason is that investment leads to greater potential down the road. The way the FairTax bill is written, these are the only exemptions that will be allowed, preventing the armies of special interests from carving up the bill and elevating the tax rate for all Americans. THIS is the prime reason there is a lot of misinformation and fear-mongering out there about the FairTax - because under this system, special interests would lose their ability to craft the tax system in their own self-interest.

Third, the middle class tax rate. If you take it at face value, as opponents often do, it looks like the lower and middle class will pay 15% more than they presently do. This, however, does not take into account the savings of producers and distributors that is gained from the elimination of corporate taxes and payroll taxes, not to mention the savings of households that do not have to have payroll taxes withheld. In essence, 22% of the cost of everything we purchase goes to pay for compliance and taxes within the current tax system. Eliminate that tax system, and 22% of the cost of products is instantly eliminated. Thus, theoretically, costs will drop 22% and then be elevated 23% by the FairTax. Meanwhile, families will receive about a 10% increase in take-home pay and have full discretion over the use of their money.

The prebate, when analyzed properly, makes this tax progressive. Special interests' power is diminished. And most importantly, Americans gain power over their own money, and no longer are held like slaves to the IRS, required to submit, pay money for tax preparers, and be guilty until proven innocent.

I hope this clears things up. For a more complete understanding of the FairTax, please read the bill. It is only about 120 pages long (compared to the 60,000+ of our current code...).

-Kilborn

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COLUMN: Time for a fairer tax

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