At a recent meeting of the Henry County Republican Party, most people in the room raised their hand when asked to show if they supported a Fair Tax. Some of the people who did not raise their hands said later that they were not sure what the Fair Tax proposal is all about. They did not want to claim support for something they did not know about. For people who are not sure about it, here are some facts:
The Fair tax is a proposal to change federal tax law so that all federal income taxes would be eliminated and replaced by a national sales tax. As it was presented by Georgia Republicans John Linder and Saxby Chambliss more than ten years ago, the Fair Tax Act (H.R. 25/S. 296) would be levied once at the point of purchase on all new goods and services for personal consumption. The sales tax rate, as defined in the legislation would be equivalent to a 30 percent sales tax
Supporters of the plan say that a consumption tax would have a positive effect on savings and investment, that it would ease tax compliance, that the tax would result in increased economic growth and incentives for international business to locate in the U.S. Moreover, those in favor of the Fair Tax say that the plan would decrease tax burdens by broadening the tax base, effectively taxing wealth, and increasing purchasing power.
There is some debate, however, as to whether a national sales tax would raise less revenue than the current tax system, leading to an increased budget deficit, and also whether a large consumption tax would be more difficult to collect than the current income tax.
Investors have expressed concern about how the elimination of the federal income tax would effect the current tax advantages and tax credits of state and local bonds holders and also if incentives on the use of credit would be loss, such as deductions for mortgage interest.
Since there has been no action by the U. S. Congress, some state legislators have been making noises about changing state laws. The federal bill was re-introduced as the Fair Tax Act of 2003 (H2556) and got 54 co-sponsors. That bill would amend the Internal Revenue Code, repeal income taxes, estate and gift taxes, and employment taxes. It would impose a tax on the use or consumption in the United States of taxable property or services.
The bill was referred to the House Committee on Ways and Means in May 2004, but was never reported out of committee. Congressman John Linder and talk show host Neal Boortz wrote a book about the Fair Tax in 2006. Former Presidential candidate and former Governor Mike Huckabee has been talking about the Fair Tax on Fox Business.
Whether more than ten years of talk can be truned into a change in the federal tax law remains to be seen.
Comments
John Linder should get a Nobel.
The FairTax is the surest path to full (and job rich) economic recovery. The FairTax restores the role of the citizen in controlling government debt and spending by making the cost of the federal government apparent on every sales receipt. The FairTax ends Congressional corruption that has swelled the tax code to more than 67,500 pages of regulations and which always favors those with connections and lobbyists. It shifts federal taxes from the very things that make the economy grow--work, savings and investment--to what comes out of the economy--consumption.
It is the political challenge of overcoming the influence of a relatively small number of people in Washington, D.C. who profit so richly from manipulation of the tax code that stands between us and a simple, transparent and fair tax system. In other words, the democracy in our Republic must work for bad public policy to be replaced by policy that actually benefits the public. It's coming--and strong enough to finally win.
Of what possible value is an income tax deduction for home mortgage interest if you don't pay income taxes? This one question pretty much exposes the weaknesses of most arguments against the FairTax. Tell you what ... after the FairTax is enacted you can go ahead and not only deduct your interest, but the principal payments and all property taxes you pay on your home from your federal income tax.
Is the light coming on yet?
Vincente, another good column as usual, but this conservative Republican former econ major does not favor the fair tax for many reasons. It might be ok, and fairer, for a nation that is starting all over, like Estonia, but for the US, esp given that the 16th amendment would have to be repealed to prevent double taxation, it is a waste of time anyway. Moreover, it would hurt the poor and middle class. more later
REALITY CHECK
1. 37% of the goods sold in the US are imported, and have no embedded US taxes in their manufacturing costs - thus the price of imports would go up by the 23% (inclusive) / 30% (exclusive) 'fair'tax rate.
So for almost 4 out of 10 items you buy, prices would increase by almost a third, with no chance of those prices coming back down.
2. 'Fair'tax supporters claim that the higher tax on imports would create more manufacturing jobs here in the US. But let's get real - 80% of the goods sold in Wal Mart are manufactured in China. In China, the average worker is paid between $75-$110 per MONTH - and many work 80 hours per week at that rate.
So realistically, even with a 23 to 30% pricing advantage, there is still no way that American companies can produce goods as cheaply as the Chinese (not with US employees making a minimum hourly wage of $7.25 per hour).
(BTW Mark DeVine, Estonia & other flat-tax nations have been hit much harder than the US by the global
Freedom loving Americans, please, please visit www.fairtax.org
avail yourselves of the in depth explanations of what the fair tax will accomplish. Do not simply accept or reject what opponents and proponents are spewing and educate yourselves, make up your own minds as to the viability and workability of this well thought out legislation. Our current tax code has become an incomprehensible monster and needs to be destroyed. The Fair Tax is not perfect but it is far and away the best plan to allow America to retake it's strong position in the world economy.
Mike Huckabee for president and Ken Hoagland as his running mate, now that is a winning combination.
Good points Laurence
The fair tax is the best stiumulus plan I can think of.
@Laurence Kotlikoff
There are embedded taxes in the costs of distribution of imported goods within America and the profits of wholesalers and retailers of said imported goods. Depending on the type of goods and the profit margins that could be a reasonably significant offset to that 30% increase you claim is inevitable.
The cost of most goods, American made or not, will most likely increase to some degree. Those manufacturers, and others in the supply chain, of imported goods will likely have to eat some of the increase on their end to remain competitive. But foreign business profit margins aren't a huge concern here.
If the cost of good increase some, how significant is it really if your entire federal income tax burden is lifted? Not to mention the prebate. Remember, the FairTax is not eliminating taxes, just collecting them in a more fair manner.
PS-Maybe you should use your own name to try to dispute the Fairtax, rather than that of one of the more notable Fairtax sup
Jim claims "
If the cost of good increase some, how significant is it really if your entire federal income tax burden is lifted? ."
Tax burden lifted? What a laugh. It doesn't lift the federal tax burden, it just shifts it more onto the middle class. President Bush's bipartisan Advisory Panel on Tax Reform found that the 'fair'tax would actually INCREASE taxes for everyone making between $15K - $200K per year.
It would especially hit renters hard, since it taxes rent (which is renters' largest monthly expense). It would also hit the uninsured with health problems very hard, raising their medical bills by around 30%. The 'fair'tax is not fair at all.
And the prebate would be the largest entitlement and tax redistribution program in history. Before they even got their first job, teenagers could start getting checks from Uncle Sam.
As far as my using this name goes, why not say the same thing to 'Neal Boortz' or 'Ken Hoagland'? I just used this name in response to their
That's the most ignorant and misleading comment I have ever seen anyone make. If I am the head of household and claim myself, my wife and 3 kids, then I would get a prebate check for 4 people under the same roof. Sounds a lot like the current claims. When my kid leaves home I can no longer claim them for my prebate, but now they can claim themselves. How on earth does that make a teen getting a prebate check a bad thing. The prebate is designed to offset the cost of living expenses and I would hope that everyone is entitled to that. You know what else it does with that prebate?? It prevents illegal immigrants from participating and forces them to pay taxes every time they spend money. It forces criminals to pay taxes on illegally obtained income because they will pay taxes just like everyone else when they spend money.
As far as imports, this is not a VAT tax. Taxes are only paid when the end consumer makes a purchase. Making up math about how much it's gong to raise the price of everything by giving misleading examples of competition is just irresponsible and obvious that such an intelligent, yet simple tax law scares people in power because it not only makes sense, but it is easy to understand.
Don't be sheep. Don't believe me or the negative comments. Make up your own mind. Visit fairtax.org. At the very least you will have an informed opinion.
Jim claims "If the cost of good increase some, how significant is it really if your entire federal income tax burden is lifted?"
Tax burden lifted? What a laugh. It doesn't lift the federal tax burden, it just shifts it more onto the middle class. President Bush's bipartisan Advisory Panel on Tax Reform found that the 'fair'tax would actually INCREASE taxes for everyone making between $15K - $200K per year.
It would especially hit renters hard, since it taxes rent (which is renters' largest monthly expense). It would also hit the uninsured with health problems very hard, raising their medical bills by around 30%. The 'fair'tax is not fair at all.
And the prebate would be the largest entitlement and tax redistribution program in history. Before they even got their first job, teenagers could start getting checks from Uncle Sam.
As far as my using this name goes, why not say the same thing to 'Neal Boortz' or 'Ken Hoagland'? I just used this name in response to their sill
How can it be "the largest entitlement and tax redistribution program in history"??? EVERY citizen gets the prebate!
The Fairtax puts US in control. Only new products are taxed. Poor and rich alike can save money by buying used!
Laurence Kotlikoff says: "And the prebate would be the largest entitlement and tax redistribution program in history. Before they even got their first job, teenagers could start getting checks from Uncle Sam."
Yup, the $600 Billion prebate feature of the FairTax replaces the $900 Billion "Tax Refund" scam that our current tax system offers us as a placebo after first removing up to 1/3 of your earnings before you ever see a dime of your "take home pay" The prebate replaces taxpayers having to go back every April 15th and beg, grovel and try to the IRS why they need to get some of the looted funds back.
The only way the FairTax's prebate feature becomes "the largest entitlement and tax redistribution program in history" is to ignore the current system's $900 Billion tax refund scam that Americans have grown to become dependent upon for making their big ticket purchases.
"Support the Candidates that Support the FairTax!"
How can it be "the largest entitlement and tax redistribution program in history"??? EVERY citizen gets the prebate!
"Support the Candidates that Support the FairTax!" YES!!!
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