Posted by
1deciple on Friday, October 28, 2011 3:55:40 PM
It distresses me greatly to witness the high level of ignorance that exists concerning the issue of taxation, even among the supposedly well informed 'Media' pundits. Just today, I heard Bill Hemmer (Fox News) speak of the FairTax as a 'flat' tax. He asked a guest to explain the difference between the FairTax and a 'flat tax' as proposed by Presidential candidate, Governor Rick Perry. The guest didn't really do a very good job explaining it either, and I was left frustrated at the resulting lack of accurate information provided viewers. It seems no one wants to take the time to inform themselves about the FairTax and learn why so many Americans are talking about and promoting it. And, that's a shame, because there is so much information to be had.
The Website, www.FairTax.org is loaded with facts and documentation including a history of how the FairTax was developed and refined by highly qualified economists, accountants and tax specialists over several years at a cost of more than $12 million. The FairTax has been translated into legislation (HR 25, SB3) and introduced into the last three sessions of Congress by no less than sixty co-sponsors. Even so, there is still a great deal of misinformation and confusion regarding the structure and benefits contained in The FairTax. It appears to me that most of the 'elite' Media people remain mostly ill informed or totally ignorant of the facts about it, an even worse circumstance.
I am at least gratified that more people are talking about tax reform these days, and that The FairTax is at least getting more attention and exposure to the general public. Former presidential candidate, Mike Huckabee, now a Fox News Channel personality has contributed a lot to public awareness and understanding of The FairTax, as has current front-runner candidate Herman Cane. Actually, Cane's 999 Plan is based on, or you could say, is a derivative of The FairTax. In fact, Mr. Cane says his 999 Plan is really 'Phase One' to eventual enactment of The FairTax in its entirety. His strategy seems to be to get the electorate used to initiation of a consumption tax and repeal of most of the taxes on income, along with the positive results such changes will inevitably produce to the economy.
It's a little hard to explain in simple terms, but I'd like to take a stab at it anyway. Several factors are involved in the relationship between those who provide products and services and those who consume them. Chief among these is the part that taxes play in the cost of doing business. What consumers pay for goods and services depends on what it actually cost to produce or provide. Since a provider must make a profit to remain in business, he must first build his costs of doing business into the price he charges plus a measure of profit. Along with labor and materials, fees, permits, rent, utilities, insurance, equipment, and depreciation, he must also calculate his cost associated with taxes he must pay. The higher his taxes, the more he must charge to make a profit. The same principle holds true for all his costs involved in doing business.
Added to the dollar amount of his taxes, there is also the cost of compliance, often involving tax attorneys, accountants and other employees hired to make certain he meets all his tax liabilities and takes advantage of all legitimate deductions. This is where the beauty of The FairTax becomes evident. The FairTax eliminates ALL taxes on income, including corporate/business income. Since there is no tax on the business income, the cost of compliance is also eliminated, saving the business a huge percentage of his cost of doing business. The result is, he is then able to charge less for his end product or pay his employees more--or both--thus making his product/service easier for consumers to buy. While a percentage of his reduced costs adds to his bottom line, competition from other providers, along with increased demand as a result of lower prices would assure that consumer costs would be reduced as well, a win win for all.
Now, couple the reduction of costs for goods and services with the increase in personal disposable income resulting from repeal of ALL taxes on income of every kind and what do we have? Everyone prospers. Business reaps higher profits, investors and owners enjoy greater return on investment , individuals instantly have more to save, invest and spend for the things they need and want for their families.
Another very important effect of The FairTax is that the tax base is broadened tremendously, because the mechanism for funding government is changed from taxing income to taxing consumption--a National Retail Sales Tax. As a result, all those who presently escape taxation-the 'underground' economy, so called-are brought into the system and forced to contribute to Federal tax revenues when they purchase something new. Suddenly, all the hidden taxes consumers have been paying for years are wiped out, and they can control for themselves how much they pay according to the buying choices they make. Thus, Federal taxation becomes fully transparent.
It is important to note that a very crucial element in HR 25 is the provision for repeal of the 16th Amendment, which authorizes the Income Tax. Framers of The FairTax have made sure that Congress will first be stripped of the power to tax income BEFORE the FairTax becomes permanent law. Another important feature of The FairTax is the provision to 'exempt' the cost of basic necessities from the retail sales tax. This is accomplished through a 'Prebate', a check to each family, based on number of members in the family, and calculated at 23% of current, established poverty level. Those who say The FairTax will hurt the low income folks more than others do not understand this provision. The Prebate negates any possible regressivity that may be inherent in a retail sales tax. Incomes of some low and fixed income individuals will even be increased by the Prebate feature of The FairTax.
While it is true that new products and certain services will include a 23% Federal Sales Tax, it must be remembered base prices will be lower as a result of competition when providers' cost of doing business is reduced by the termination of taxation and costs of compliance. Additionally, under The FairTax, all taxes on income; wages, return on investments, dividends, interest, any capital gains, inheritance, lottery--any income--will disappear completely. This means citizens of the United States will be able to keep ALL their income, whatever the source with no tax obligation whatsoever. This will encourage more saving, investing, charitable giving, and freerer spending for consumer goods. This in turn, will fuel greater demand, which will call for more production, which will require hiring more people to meet the demand. These positive effects on the economy will far outweigh the inconvenience of an additional sales tax. It should be apparent to anyone that the economic 'climate change' resulting from passage of The FairTax could only be described as positive and transformational.
1deciple
Anyone who really wants to understand The FairTax should visit the Americans For Fair Taxation Website: FairTax.org.