By Tom Quiner

The party in power used the IRS to target their political enemies.
It worked. They retained power by delaying and preventing their enemies from forming tax-exempt organizations that would oppose them in the marketplace of political ideas.
Chances are, the party in power is going to get away with this abuse of the public trust, and a dangerous precedent will have been established. Will the next party in power turn the tables by doing the same, by going after their political enemies using the IRS as their attack dogs?
It doesn’t have to be this way. The time has come to change the way we raise money for the legitimate needs of our government.
Imagine a system that doesn’t require tax returns. The IRS would no longer be needed and would be shut down.
Imagine a system that doesn’t require a withholding tax. In other words, imagine a system that lets you keep your entire paycheck, even, and especially if you’re a pensioner.
Imagine a progressive system that eliminates all taxes for people living beneath the poverty level, and yet collects dramatically more money from the wealthiest?
Imagine a system that collects revenues from undocumented workers to help defray the high cost of border security.
Imagine a system that gets the federal government OUT of the business of collecting taxes altogether.
Imagine a system that even generates new government revenues from the hands of the mob, thieves, money-launderers that otherwise would have escaped taxation.
Imagine a system that reduces compliance costs to zero, freeing up capital for more creative, productive purposes.
Imagine a system that strips away power from politicians, big corporations, and Big Labor and puts it squarely into the hands of the taxpayers.
Imagine an income tax-free zone, the United States of America, that would become an anchor for entrepreneurs from around the world seeking to create start-up businesses free from punitive taxation, taxation which ratchets up the risk for success. We would become a magnet for the best and brightest from every corner of the planet.
Do I have your attention?
Welcome to the Fair Tax.
The Fair Tax begins with a critical first step: the repeal of the 16th Amendment to our Constitution:

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.

The next step is the passage of a non-partisan bill, H.R. 25 / S. 122, which abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes.  ALL existing taxes would be replaced with a federal retail tax, a national sales tax, so to speak. Researchers project that a rate of 23% would be revenue neutral.
You would be taxed only when you buy stuff. The tax would primarily be collected by retailers under the jurisdiction of the individual states. Alternative methods would be used for those states that don’t have a sales tax.
The federal government would pay a percentage to both the states and the retailers for going to the effort of collecting the tax, an amount far less than what we currently pay the corrupt IRS.
What about the poor? Isn’t this a regressive tax on folks living below the poverty line?
No, not at all. Every Social Security cardholder would receive a monthly “prebate check” from the federal government which would cover the potential tax a person beneath the poverty level would pay for essential goods and services as measured by the Department of Health and Human Services. According to FairTax.org:

This is a well-accepted, long-used poverty level calculation that includes food, clothing, shelter, transportation, medical care, and so on. The amount of the Prebate payment is computed by multiplying the poverty level expenditures by the FairTax rate according to the following schedule. For a two adult, two child household the annual prebate amount is $7,236 or $603 per month.

That’s it.
No tax returns.
No IRS.
A complex tax code would be abolished, replaced with an elegant Fair Tax.
Criminals who hide their loot from the Feds could no longer hide it. Every time they buy a fur coat for their girl friend(s), they’ve got to cough up the tax.
Illegal immigrants have to pay the tax with every single purchase they make.
Zillionaires like Tiger Woods would pay a ton of tax with each new yacht they purchase. At the same the time, those living below the poverty level pay none since their tax is covered with their monthly prebate.
There is no compliance cost to individuals or corporations, since all tax is paid at the retail level.
Here’s what I really like: politicians and Big Business would lose power, since they could no longer game the tax code to their advantage. Another thing: since consumers would feel the pain (tax) with every single purchase, politicians would find it more difficult to raise taxes.
Even more, they’d find it more difficult to pit the poor against the most productive (aka ‘the rich’) Americans, since the productive would obviously be paying so much more tax each week.
The IRS is corrupt under the Obama regime. Only the most ardent left winger would disagree.
The time is ripe to replace the corrupt with the fair.
The time has come for the Fair Tax.
 

 
 
 

8 Comments

  1. illero on June 26, 2014 at 5:43 am

    Could be promising, but I’d sure need to see a lot more examples of how revenue-neutral this is at the individual-family level. Effective federal income tax rates are far below 23% for the big majority of American households, even households with AGIs above $150,000. This would also have to be phased in carefully, because the knee-jerk reaction to adding 23% to the cost of goods would probably result in people pulling back on their spending until the process is proven — just the reaction that could deep-six the grand experiment. Where is this type of tax successfully used across the world?

    • quinersdiner on June 26, 2014 at 8:15 am

      Very good questions. No, I’m not aware this same system is being used in other countries. Europe uses a Value-added Tax, which is different. Regarding your questions about the rate, here is what the folks at FairTax.org have to say:
      “Most people are paying that much or more today — much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That’s 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in the business taxes and associated compliance costs passed on to consumers in higher prices.
      Effective tax rates vs. stated tax rates
      Because the 23-percent FairTax rate of $0.23 on every dollar spent is not imposed on necessities, an individual spending $30,000 pays an effective tax rate of only 15.5 percent, not 23 percent. That same individual will pay 17.3 percent of his or her income to federal taxes under current law.”

      • illero on June 26, 2014 at 10:36 am

        Not sure I’m convinced. Looking back at my own effective rates over the years, it’s hard to see this coming out neutral for me. But let’s say that it did. Does the bill suggest how we verify family size, and how “family” is defined? And if we give a prebate allowance for family size, which, after all, is a choice, not a necessity, have we not opened the door for other allowances that may or may not be choices (such as age, disability, extraordinary medical bills, etc.)? I know, I know, I’m looking for nits before serious debate takes place, but the idea of the so-called “Fair” Tax has been around a long time — let’s see some serious essays on the goodness or badness of the different ways to impose such a thing. And then there’s the issue of putting literally tens of thousands of people out of work. These days we can’t even be sure that the bill’s sponsors are serious, rather than just trying to gain some attention by riding a wave of anti-IRS sentiment. Boy, has my attitude gotten jaded.

  2. […] Diner reader expressed a legitimate concern on the plan in my previous post on the subject (“The time has come to abolish the IRS. Here’s how …”). Since the proposed Fair Tax rate is 23%, wouldn’t that amount to a tax increase on most […]

  3. abcinsc on June 26, 2014 at 10:17 am

    You’re right. The current system is beyond fixing.

  4. Shawn Pavlik on June 29, 2014 at 2:32 am

    It’s actually a 29% sales tax Tom. Eek.

    • quinersdiner on June 29, 2014 at 6:57 am

      I think it is actually .30, but effectively .23.

    • quinersdiner on June 29, 2014 at 6:58 am

      The end result is better for most people.

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