Saturday, April 26, 2008

To FairTax or Not To FairTax -

A couple of years ago, I read The Fairtax Book by radio host Neal Boortz, along with John Linder, the Georgia Congressman responsible for proposing the FairTax bill. I'm still not 100% convinced in the FairTax, but I was extremely pleased to see it coming up as a serious issue within the Republican primaries thanks to Mike Huckabee, who made it a major part of his platform.

In this new book, FairTax: The Truth, they return (along with Rob Woodall, Linder's Chief of Staff) to relate further advancements in the FairTax, as well as to deal a bit more directly with some of the criticisms.

For those unfamiliar with the FairTax, the basic reasons for the FairTax are as follows:

1. The current tax code allows politicians to covertly give benefits to one group and penalize other groups by modifications to the elaborate tax code. Ultimately, all of these penalties to corporations and industries trickle down in the cost of goods and services to the individual customers.

2. The current tax code, in the form of both income tax and payroll taxes (Medicare, Social Security, etc.), provide unequal distributions of taxation. Low income earners are burdened with payroll taxes on their earned wages while wealthy individuals are able to virtually avoid payroll taxes entirely since they earn low wages, but gain vast wealth from capital gains and other non-payroll taxed methods.

3. Currently a number of individuals in America do not participate as part of the federal tax basis. Specifically, tourists, illegal immigrants, people paid "off the books," and those involved in illegal activities are able to earn incomes without being any part of the federal taxation system.

The FairTax seeks to remedy this by eliminating the IRS, along with current income, payroll, corporate, capital gains, and estate tax laws. This would be replaced by a 23% inclusive consumption tax on all goods and services sold in the United States, expanding the tax basis considerably. (A 23% inclusive sales tax means that if you buy an item for $100, you just paid $23 in sales tax.)

The portion which makes this tax feasible (not to mention progressive) is that every legal resident of the United States would register the number of people in their household annually. Based upon this number, they would obtain a prebate every month up to the poverty level. In other words, everyone would be exempt from taxation on the necessities. People at the poverty level would have zero federal taxation, while those near it would have virtually none.

There are many nuances to the FairTax bill, although it is only 133 pages long, so it's relatively straightforward as far as legislation goes. The books do an excellent job of illuminating the key points, as does the Americans for Fair Taxation website. Of course, all of these are propaganda in favor of the FairTax. For an alternate account, I would consider the fairly balanced Unspinning the FairTax at FactCheck.org ... although in FairTax: The Truth, they address some of the issues brought up in this article (though not the article specifically ... just the issues in general) and, in my opinion, fairly handily deal with them.

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