The Fairtax - Familiar With It? Never Heard Of It?

[BluesStringer]

I am an activist volunteer for FairTax.org. The FairTax is a bill, authored by Rep. John Linder and introduced by him in the House and by Saxby Chambliss in the Senate, both from Georgia. Thumbnail sketch:

1. Eliminates all payroll taxes from the federal level and replaces them with a national sales tax.
2. Eliminates the death tax, the alternative minimum tax and all corporate taxes.
3. Relieves the poor of 100% of the federal tax burden by instituting a "prebate" system that sends every household a check each month, based on the number in that household, not based on income, in anticipation of the bare minimum of spending on life's essentials. The annual payout is based on the US government's poverty level numbers as published from year-to-year, and as such, is adjustable for inflation and/or other cost of living considerations.
4. Disbands and abolishes the IRS. 70,000+ pages of impossible-to-understand-or-fully-comply-with Tax Code is replaced by 150 or so pages of the most transparent and easy-to-understand tax system ever devised.
5. Lays the groundwork for the repeal of the 16th Amendment, which authorizes the fed to collect taxes based on income.
6. Creates the largest tax haven for business the world has ever seen. Will not only bring homegrown businesses that have fled overseas due in large part to confiscatory taxation back home, but attracts foreign investment as well. All research, and it is extensive, points to a 10% growth rate in the economy in the first full year after implementation.
7. Virtually eliminates the underground economy from evading taxes. Illegal aliens, drug dealers, prostitutes, organized crime will all pay federal taxes every time they buy goods and services.
8. Vastly reduces the ability of politicians and special interests (read: lobbyists) to intrude on the lives of Americans through manipulation of the Tax Code.

There's lots more. I am very well-versed on the intricacies of the plan and can answer most questions and/or concerns. What I can't answer, I know how and where to find the answers.

There is a lot of misinformation out there about The FairTax, some just simple ignorance of the facts, and some intentional smearing of a plan that takes more power from politicians and special interests and returns it into the hands of The People than any other piece of legislation in American history. So if you've heard things like, "The FairTax will add 30% to cost of everything you buy," please keep an open mind. It's not true, and if given an open-minded chance, I can show you that the overwhelming majority of criticism against the plan is based on assumptions, mistakes and outright lies that either must change the terms of The FairTax to make any sense, or that are wholly misrepresentations to begin with.

This is not Forbes' or Shelby's flat-tax plan. There are some good things about both of them, but neither gets rid of payroll taxes, the IRS or the Tax Code, nor does either plan give you, the individual, the ability to pay taxes voluntarily over and above what it takes to get by.

So let's talk about it. The worst that can happen is that we all learn something about a piece of legislation that is currently working its way through Congress. Oh, which reminds me, if you want to look up the text of the bill(s), they are H.R. 25 in the House and S. 1025 in the Senate.

Blues

[rabywk]

Ok I understand what you are saying and can see this working for the younger generation in this country.

The people that are close to retirement will fight this tooth and nail. They have already paid their taxes and are getting ready to move into the time of their life where taxes start to ease up for them.

But this would be a way to help save our SS network. The Baby Boomers are getting ready to bankrupt the system and this would keep it going for the rest of us.

So this would be eliminating Income Tax. Can more taxes be added to this National Tax. Here we have City, County, and State taxes added in on the things we buy already.

[BluesStringer]

I'm sorry rabywk, I just saw that I had a reply here. I thought everyone here just wasn't interested.

You are correct that one of the bigger controversies is/will be older folks having the perception that they're being taxed twice under this plan. But the plain fact is that, while it is very well-hidden, everyone, young and old alike, is paying WAY more in supporting the current system than just the 15% - 27% that shows up at the bootom line of our returns every year. Bear with me while I try to explain....

This plan completely eliminates all corporate taxes on income/revenue. Now, that by itself is a significant savings in the cost of doing business in this country, but it barely scratches the surface of the total savings. The truth is that, even under the current system, corporations already relieve themselves of any *real* tax burden by simply passing those costs on to us, the consumers. Labor, debt maintenance, capitol expenditures and, yes, tax liabilities, are all accounted for in the price we pay at the register. But that's not all. It takes enormous amounts of man-hours just to comply with the current system, and then all the reports and returns that go to the government which are the result of those compliance efforts put another cost on top of everything else. And God forbid that a company gets audited and must devote still more resources to complying with the corporate tax system as it stands now.

All of that goes away under The FairTax. The extensive research that has been done on this plan estimates, on average, 22% of the cost of every single good or service that we buy now is the result of those costs to comply with our burdensome tax code.

So, back to seniors being taxed twice, they are paying that 22% right now, hidden though it is, and they're getting hit with more income taxes on the interest their nest egg earns. Under The FairTax, their interest is all theirs to keep or spend or give to the grandkids with no threat of gift-tax liability for them, and they're receiving a check every month, depending on the size of their household (how many in it), for the bare necessities up to poverty-level spending. Based on the poverty-level spending for 2007 thus far, a retired couple (with all their kids/grandkids not living in the house) would receive a monthly check of $349.00, or $4188.00 annually.

When you factor all the hidden, or embedded taxes that are created simply by virtue of companies having to comply with the current system, the 23% FairTax is an almost break-even proposition, even to seniors.

But this would be a way to help save our SS network.

This will be a way to stave off the impending doom of the SS system, but I wouldn't go as far as to say it will "save" it. The way it will help in the short-term is that it expands the tax base significantly. Everyone, drug dealers, illegal aliens, prostitutes and even tourists will contribute to the tax base that they are able to completely evade right now.

In the long-run though, The FairTax is not about the SS system. It neither denies the fund any monies nor diverts anything extra to it, at least not in and of itself. As the tax-shelter part of the plan becomes a reality and businesses start up or come back home from overseas, and as jobs get created as a result, revenue to the Treasury will certainly increase. But The FairTax makes no stipulations on how revenue is spent by the government. If there's more coming in, and the SS system gets close to bankruptcy, then the higher revenues would most likely go towards salvaging it for a bit longer, but that decision remains right where it is now; in the hands of our spendthrift government.

Can more taxes be added to this National Tax. Here we have City, County, and State taxes added in on the things we buy already.

Your local and/or state tax systems are not effected in any way by The FairTax, so yes, they will be added to the purchase price at the register. But, like I already explained, The FT is very close to a break-even proposition +/- about 1%. Any company that doesn't lower its prices commensurate with its new-found savings won't last a week in business. The market forces on them to do so will be greater than any forces driving the economy right now because everyone will know about The FT. It's pretty simple really. Are you going to do business with a company that charges 22% or 23% more for their goods and services than the business right next door? Of course not! The average 22% savings in the cost of doing business will disappear and be replaced with The FairTax, thus, prices will generally stay the same. So even though your state and local taxes are added on top, just like they are now, the out-the-door price will remain very close to where it is now.

One thing to keep in mind on that score is, before passage of the 16th Amendment (authorizing the income tax), no state had an income tax system. Now, all but three (I think) do. As state governments see what The FairTax does for jobs creation and revenue to the Treasury, they will likely adapt to a similar system in the not-too-distant future after enactment of The FT.

And, as to the broader question of whether or not the legislation allows for increases in the 23% rate, yes, it does that too. Then again, just like now, the rate can be cut too. But imagine that Uncle Sam tried to raise it surreptitiously. How long would it be before they had a revolt on their hands? Right now, if you're paying 15% and they raised it by 1%, would you notice? But suddenly, under The FT, you see right on your receipt that it went from 23% to 24%. You'll know it immediately, making The FairTax the most transparent tax system ever devised. It takes more power out of Washington and puts it squarely back in the hands of The People than any single piece of legislation in our country's history.

Sorry for the lengthy response. I hope I've answered the questions you've asked thus far and encourage you to ask more as they come to mind.

Blues