Keeping with yesterday’s theme of watching President Barack Obama as he considers raising taxes on the middle class, I thought today would be the perfect time to talk about a book that I recently completed: The Fair Tax Book – Saying Goodbye to the Income Tax and the IRS. This book, by Neal Boortz and Congressman John Linder, contemplates an entirely new tax code for the United States of America. Boortz and Linder consider a whole new system – one based off of a consumption tax.
What is a consumption tax? It means that everything a person purchases is taxed at between 22% and 23%. But wait! That’s the only tax that anyone ever has to pay – ever. No income taxes, no business taxes, no capital gains taxes – nothing. You name a tax other than a consumption tax and it doesn’t exist. Another thing to keep in mind is that the tax is only assessed once. For example, if you buy a brand new car, you pay the tax. However, if you buy a used car – no tax. The Fair Tax is only assessed once.
The other critical point to remember under the Fair Tax is that each household in America would be reimbursed on a monthly basis for a dollar amount equal to what they would spend on basic goods. This immediately removes the argument that poorer citizens would be facing an undue burden under the Fair Tax. They wouldn’t be facing that burden because the government would provide each American household with a subsidy equal to what they would typically spend each month on consumption taxes for basic necessities.
There is obviously too much to go into in this small space. However, if you are interested in government reform or new ways for America to meet its obligations to its citizens, then I would recommend reading this book. I was completely against a Fair Tax when I first picked up this book, but after reading it I am convinced that it could be a great step forward for America in the new world economy.
You know,that’s really not a bad idea. There’s something similar to that here in Canada but on a much smaller scale. We still pay income taxes and such, but about…20 years ago give or take,the government introduced something called the goods and services tax (GST). It’s a 7% tax (it’s since been lowered) that applies to a lot of consumer goods. On a quarterly basis, people below a certain income level get a small rebate from the government to help them cover the extra costs associated with buying things. Scaling it up to the model you’re talking about here definitely seems like something worth looking into.
Wow! You better reread that book. The prebate offsets the sales tax paid on spending up to the poverty level, not all spending up to the poverty level as you claimed. And, on the subject of the prebate, you are welcome to think about it as a refund of taxes paid, but it really isn’t. The prebate is a $600 billion annual cash grant entitlement which can be spent or saved as your circumstances allow. In short, it is another welfare program. The federal budget can’t stand another entitlement of this size when entitlements are squeezing out discretionary spending, including Defense discretionary. In the unlikely event that the Revenue Subcommittee of the House W&M Committee takes up HR25, I predict that the prebate would be the first thing to go. A targeted prebate or simply retaining the EITC would protect the poor from a regressive sales tas at one tenth the cost of the Fairtax prebate.
You are correct that there would be no sales tax on any goods for which the sales tax has been previously paid. But don’t expect to have any windfall savings. Used prices will quickly adjust to new prices with the sales tax. No tax revenue will flow to the Treasury for a used sale, but the used price will still contain a tax element. Think about it as the embedded cost of the Fairtax!
Reading one or both of the Fairtax marketing comic books written by a radio talk jock and an obscure Georgia Congressman does not qualify anyone as a Fairtax expert. They told only half of the story. I suggest you try fairtaxblog.com, where there is an extensive research section with studies by experts both pro and con Fairtax.
Hank Van Gieson must have a lot of time on his hands and make his living off the income tax, because these disinformation paragraphs appear on just about any site where someone writes about the FairTax. No amount of disinformation will overcome the most vetted tax idea since President Reagan lowered the tax rate on individuals from 70% to 28% and doubled tax revenues over about 6 years in the 1980s. I’d be inclined to lowering my tax rate to 0% under the FairTax, then decide when I want to pay taxes while not having the federal government hold me guilty until proven innocent after cashing my remittance check each year.
When you can’t refute the message, attack the messenger. Chuck, I would challenge you to refute or correct anything I have written about the Fairtax. Turns out I do have lots of time to read and understand the details of HR25. But, I don’t work for the IRS. I’m an MIT alumnus, career Air Force pilot and officer, and 20 year Director of Government Affairs for a major aerospace company. I’ve been shot at and missed in two wars, defending your right to write any fool thing you care to. So, how about telling everyone just what disinformation you think is contained in my post?
Good luck!
I sometimes ponder how somebody can live in poverty. All I know for certain is that I thank God that I am in the USA.