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Why the “FairTax Revolution” is gaining strength

Tuesday, September 11 at 6:00 PM

This Speakout has not been edited.

By Ken Hoagland

Nearly every taxpayer understands on a gut level the dysfunction of the income tax system. American taxpayers are reminded, after all, every April 15th of just how indecipherable the tax code has become and how difficult and expensive it has become to obey the law.

The tax code, at 67,500 pages of regulations and growing, confounds even the IRS. In truth, our tax system has become a patchwork quilt of political favors and punishments that has very little to do with the health of the national economy or the well-being of taxpayers. Instead, the income tax system has almost everything to do with the well-being of Members of Congress, a wealthy and influential army of tax lobbyists and thousands of “camp followers” who profit from continual tinkering with the tax code.

The FairTax replaces the destructive idea of taxing productivity and growth with the better idea of a tax on consumption at the point of final retail sale. In a nutshell, those with the wealth to spend more, pay more. Citizens across the political spectrum have flocked to the FairTax because, unlike the current system, it is fair, simple and transparent. Special interests, tax lobbyists and arcane provisions are dealt out and the tax base is profoundly broadened to include illegal immigrants, the underground economy and even foreign tourists. The FairTax also eliminates the highly regressive Social Security and Medicare tax while providing a far broader stream of revenue into those faltering programs.

Unlike any other sales tax, the FairTax provides a universal “prebate” paid at the first of every month to every American household. The prebate is calculated by family size, not income, and wipes out or offsets taxes paid throughout the year. For those at or below the poverty level, the FairTax prebate eliminates the entire amount of FairTax that family would pay. The closer a family or individual is to the poverty level, the greater the effect of the prebate on the family’s annual tax burden. A middle class family of four will see about $27,000 of federal tax free spending a year with the FairTax prebate.

The FairTax appeals to citizens across the political spectrum because at the same time that it untaxes the poor and helps the middle class, it takes the tax system out of business and investment decisions. All taxes on income, savings and investments are eliminated including capital gains taxes, corporate taxes and inheritance taxes. “Embedded” income tax costs that represent up to 20% of the price of everything we buy are eliminated, taking away the price advantage now enjoyed by foreign manufacturers which is killing off the “Made in America” label and sending American wealth (and jobs) offshore. The predicted influx of both American wealth and foreign investment to the United States after enactment of the FairTax is estimated to be in the tens of trillions of dollars.

The “catch” of the FairTax is that our own elected officials are generally unwilling to do more than pay lip service to real reform and simplification. There are too many voices in Washington with too much to lose to make enactment of the FairTax easy.

The fact that citizens can finally take home their whole paychecks, without federal withholding or payroll taxes deducted, that retail prices will fall when embedded taxes are eliminated, and that the FairTax does not pit income groups against each other has not been sufficiently compelling to most in Congress to win them away from their self-interest.

For this public policy to become law, the public will have to drive the legislation—right across an army of income tax defenders. This process has begun in town halls and on the campaign trail across the nation and has already motivated status quo defenders to gross distortions of the proposal and its origins.

Increasingly, however, the public is seeing through these distortions and through the empty promises that, “something has to be done” about the income tax code and are demanding that politicians and candidates, instead, “dare to be fair”.

Ken Hoagland is the national communications director of FairTax.org.

READER COMMENTS

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Posted by nvgjpvzpqb on November 23, 2007 02:53 AM

Hank your right on! James your missing the point. a flat tax would benefit everyone from the minimum wage teenager, to the corporate fat cat. funding our infrastructure, health, military fairly. distributing the burden fairly.

Posted by Froward on September 22, 2007 08:05 AM

I agree on one thing, something must be done, but I am not sure that a "flat" or "fair" tax is going to address the real problem.

The real problem is our government has grown out of control, gobbling up entire industries that were once driven by local communities and organizations. Everything from poverty alleviation to water supply to educational institutions are now viewed as the sole domain of our governments.

The problem with this is the inefficiency of service delivery by our government. It is corrupted by special interest groups who want to make money at virtually every level and by partisan politics that cloud the issues and make it almost impossible to get anything done in a reasonable time or at a reasonable cost.

To truly address the issue of taxation, we need to start with a sound budget and a government that doesn't try to do everything for everybody.

Posted by James on September 20, 2007 12:44 PM

Fair tax, flat tax...anything but the current plan that generates and promotes financial inefficiency, financial and economic misallocations and is a wasteful productivity killer.

Meanwhile, the USA is #2 on the planet with corporate income taxes while the rest of the world is going flat, and eating our lunch in the process. Russia is flat, Poland is flat, Iraq is flat and so are dozens of other countries newly flat. No wonder why the dollar is weak, we are losing our competitive advantages very quickly.

Posted by Hank on September 18, 2007 11:11 AM