Wouldn't you love to abolish the IRS ...
Keep all the money in your paycheck ...
Pay taxes on what you spend, not what you earn ...
And eliminate all the fraud, hassle, and waste of our current system?
All this and MORE! The Fair Tax Book written by talk radio entertainer Neal Boortz and Republican Congressman John Linder is selling like hot cakes in some circles and advances an alternative method of financing big government. These two men have been trying to sell the "Fair Tax" idea for years and have now found a larger audience willing to be bamboozled by dubious claims.
Fair Tax proponents don't like to dwell on details and the Fair Tax website is amazingly short on factual information about the Fair Tax Bill (HR 25). The website does not even include the text of the proposed legislation that Rep. Linder has introduced in the 106th, 107th, 108th and 109th Congresses. The measure continues to sit in the Ways and Means Committee.
Fortunately, the text of the bill can be read by going to Thomas and entering "HR25" into the search field. The Fair Tax proponents tout it as simple, however the bill is quite long and is rather complicated. It requires the filing of forms with the government as a condition of receiving your monthly government check.
Yes, your monthly government check. The Fair Tax folks don't talk about that. The 16th amendment is another thing the Fair Tax folks aren't clear on. Proponents have said the bill would repeal the 16th amendment. But, the bill actually says: Congress further finds that the 16th amendment to the United States Constitution should be repealed. Should be, indeed. But that requires an amendment to the Constitution, not just a Congressional finding.
The Fair Tax would eliminate corporate and individual income taxes, estate & gift taxes, and payroll taxes. A sales tax of 30% would be imposed on all goods AND services. This tax would be in addition to local and state sales taxes. The Fair Tax proponents say the tax is 23%, but that is misleading. When they talk of a 23% tax, they are talking about inclusive tax - that is to say that the tax will be 23% of the total price paid including the Fair Tax.
The overview found last year on Linder's website states the following:
"We think that the way we collect taxes is a separate question from how much we collect
in taxes. Therefore, the Fair Tax is imposed at a revenue neutral rate that will replace the
revenue currently generated by the income tax, including all payroll taxes and capital
gains taxes, estate and gift taxes, corporate income and self-employment taxes."
So, Linder's purpose is not to remedy overtaxation, but rather change the way citizens are overtaxed. Proponents say citizens will suddenly realize how much they pay in taxes and demand smaller government. This sounds logical, but it seems this might not have crossed Linder's mind since he included so many provisions about increasing taxes in his bill.
Neal Boortz, who claims to favor small government, has advanced the notion that by reaming consumers at the checkout counter, Americans will want smaller government. For those unfamiliar with Boortz, he is a conservative radio talk show host who claims to be a libertarian. Of course, he is the type of libertarian who is pro-war and pro-Bush which means he is no libertarian. He claims that he favors legalizing drugs, but since "the people" are against this, libertarians should never mention this issue.
Boortz also believes in small government but since "the people" aren't ready for smaller government, they should be made aware of how much government costs by hitting them with a huge sales tax. Then Americans would realize they are paying too much in taxes and vote for smaller government.
So-called fiscal conservatives have been telling us for years that they favor smaller government, yet they never seem to actually propose legislation that gives us smaller government. To the contrary, they vote for legislation that increases big intrusive government. They also vote for tax cuts without offsetting the cuts by reducing government spending.
Linder makes the following claims regarding the results of the Fair Tax without substantiating them:
-Dramatically reduce the costs of goods and services by 20 to 30 percent.
-Allows you to keep 100 percent of your paycheck, pension, and Social Security payments.
-Gross Domestic Product will increase by almost 10.5 percent in the first year after enactment.
-Compliance costs would decrease by 90 percent.
-Real investment would initially increase by 76 percent relative to the investment that would be made under present law. While this increase would gradually decline, it remains 15 percent higher than under the existing tax structure.
-Exports would increase by 26 percent initially and would remain more than 13 percent above the level under the current tax system.
-Real wages will increase.
-Increases incentives to work by as much as 20 percent in many households, leading to higher economic growth and efficiency.
-Interest rates will fall 25 to 35 percent.
To prove some of these claims would require an economist to gaze into a crystal ball and predict the future, something that most government economists have never been able to do with any accuracy. While the Fair Tax may reduce the cost of goods, the combined federal, state and local sales taxes may increase the actual price paid. It is difficult to determine whether goods will cost more after the Fair Tax is enacted, but it is likely that the final cost of services will actually increase as there is currently no tax on most services.
Predicting what the results of the Fair Tax would be on exports, investments and interest rates with any accuracy is sort of like picking lotto numbers. When have government economists ever been right about these types of predictions? If they could accurately predict future economic data, socialism would be popular with libertarians. It is because government planners are rarely correct that socialism has been debunked as a failed system.
Speaking of socialism, Linder says:
"Social Security and Medicare benefits would remain the same. The Social Security and
Medicare trust funds would receive the same amount of money as they do today. The
source of the trust fund revenue would simply be sales tax revenue instead of payroll tax
It is unclear how the amount of Social Security benefits would be determined. Currently, the benefits one receives after retirement are based on the amount paid into the system. Since no individual payments into the system would be made under the Fair Tax, one might assume that benefits would be the same for all. Guess again.
The Fair Tax Bill sets forth elaborate and complicated guidelines regarding who will be allowed to get the monthly advance rebate check and how much they will get. A new huge government bureaucracy (not named the IRS) will have to be created to dole out the checks and to which citizens will be required to report income, family size, and anything else the government wants to know. Those who regard IRS forms as an invasion of privacy are not likely to be happy with the new Fair Tax agency.
The worst aspect of the Fair Tax is the monthly government check everyone would receive from Big Brother, after filing the required paperwork with the government. This is one aspect that the Fair Tax advocates never want to talk about.
"The Fair Tax would provide every family with a rebate of the sales tax equal to spending
up to the federal poverty level. The rebate would be paid in advance and updated
according to the Department of Health and Human Services poverty guidelines. Based
on the 2003 guidelines, a family of four would be able to spend $24,240 annually tax
free. They would receive a monthly rebate of $465 each and every month ($5,575
How grand. What better way for statist government to endear itself to its subjects than a monthly check? Of course, like the Fair Tax itself, the amount of this check would be subject to constant adjustments by the politicians. To the collectivists, compassionate conservatives and communitarians, it must be these government checks that make this tax bill "fair".
Fair Taxers blinded by the prospect of eliminating the IRS are unable to envision Agent Friendly from the Happy Fair Tax Bureau knocking on your door to verify the number of people in your household or to verify your income. It has never crossed their minds that Agent Friendly will be auditing mom and pop businesses to make sure they are collecting taxes for Uncle Sam. They can't even imagine a huge underground economy that will certainly spring up to avoid the 30% sales tax.
The Fair Tax bill has been around for years with over 40 Reps signing on. According to supporters, the Fair Tax has overwhelming public support and polls well. Tom Delay himself supports this bill. Despite all this, the bill continues to sit in committee. What is going to make it move?
Is the Fair Tax better than the system we have now? Maybe, but then just about anything would be better. Will it bring about smaller government? Probably not. One could argue that Putin's 14% flat tax in Russia is a better deal than the Fair Tax. All things considered, the Fair Tax may actually be worse than the income tax.
A plan to eliminate income and payroll taxes while making hefty cuts in government spending is much better than the Fair Tax plan. There is nothing fair about paying huge sales taxes on all goods and services to fund politicians who spend money like drunken sailors. The idea that a huge sales tax will awaken the unwashed masses and they will demand smaller government is absurd.
People have been calling for smaller government for years and they have been ignored. People have demanded that government end waste and fraud for years and they have been ignored. People have called for tax reform for years and they have been ignored. It is a safe bet that if the Fair Tax Bill passes, politicians will continue to ignore voters.
Americans should ignore Boortz and Linder.
This article contributed by Tom Blanton of Richmond, Virginia.