The FairTax: an introduction

>> Wednesday, April 15, 2009

Hello all!

April 15th is here! Yippee! I love tax time, the New Years or Christmas of taxes. Even though I don't pay many taxes at the moment I would, in a fashion somewhat resembling traditional Christmas euphoria, like to wish you all a happy new tax year!

Okay, so I am being silly and sarcastic. I don't really love taxes and I don't really love April 15th. However, I am not ideologically opposed to taxes. I believe they (taxes) are necessary in many situations to uphold and support good government. That is one reason I chose not to participate in todays Tea Party's being held across the nation. I feel the thinking behind them was reasonable in it's complaint (it is true that we have been taxed beyond what is reasonable) but I think they missed the mark in addressing the real underlying root causes. I may try and post a summary of my reasoning behind those remarks in the future; but in the meantime, because I believe taxes are not inherently wrong, and because I believe an excessive tax burden is only a symptom of a larger underlying problem or problems, I would like to offer up an alternative to our current tax system that both lowers our current tax rate and installs a much sounder, sustainable, and equitable means of taxation.


As the title suggests, the system I would like to advocate is known as the “FairTax.”


The thinking and rational behind the FairTax is by no means new. It has been around for a long time, but the FairTax is unique in that it has been recently developed to fit our current situation while remaining true to the old principles upon which it is built.


I thought of writing my own summaries of the FairTax, but I think it would be much better for those reading if they read the explanation of those who have studied it and much more and have a better understanding of economics and the tax system as a whole. So, in presenting the FairTax, I'll just copy and paste some things, and link to others.


With all that out of the way, allow me to begin.


The best source for information about the FairTax from an advocates perspective is www.fairtax.org, a research organization. I will use it as my primary reference (all my outside references in this post are taken from www.fairtax.org), though there is information on the FairTax elsewhere, neutral, critical, and positive.


In a nut shell, the FairTax is:



"The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 296) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax  administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system."

What does the FairTax accomplish in practical terms?  Lots of things!   But, some of the more significant are:

  • Enables workers to keep their entire paychecks

  • Enables retirees to keep their entire pensions

  • Refunds in advance the tax on purchases of basic necessities

  • Allows American products to compete fairly

  • Brings transparency and accountability to tax policy

  • Ensures Social Security and Medicare funding

  • Closes all loopholes and brings fairness to taxation

  • Abolishes the IRS


In future posts I will use collected information to make the case that the following  details are true of the FairTax:

1. The FairTax is revenue neutral at $0.23 out of every retails dollar spent

2. The FairTax lowers the lifetime tax burden for most Americans

3. The FairTax benefits retirees who depend mostly on Social Security

4. The FairTax preserves the overall progressivity of the federal tax burden

5. The FairTax dramatically improves the U. S. economy

6. The FairTax improves the international competitiveness of American producers

7. The FairTax promotes home ownership better than the current system

8. The FairTax simplifies tax compliance, thereby reducing tax evasion

In closing, allow me clarify something. I don't believe the FairTax is a perfect system, only that it is the best currently on the table (I seriously doubt anybody can come up with a “perfect” system of taxation). One of the reasons I am posting about the FairTax is that I welcome the feedback of others whether it be in agreement, disagreement, or something in between. I am happy to debate the merits of the system, but because I don't believe the system is perfect I would be more than willing to concede a point if factually proven incorrect or undesirable. :-)

God bless and veritas supra omnis!

9 comments:

sharon hunter April 15, 2009 at 8:12 PM  

Sounds like a decent proposition. I have heard about this type of taxation, but had forgotten until your reminder.

Keep striving for change,

Sir Emeth Mimetes April 16, 2009 at 7:42 AM  

Mark,

It definitely sounds better than what we have now. I do have some questions and possible concerns about it, though. Is there a bottom limit to the purchase price that is taxed? Or are only certain products taxed? How do they define "retail?"

I might be being utterly uninformed as well.

With joy and peace in Christ,
Sir Emeth Mimetes

Hillary April 17, 2009 at 1:03 PM  

Thanks for the informative post. I have heard about FT but never knew what it was. I know what it is now but I am not sure what I think about it yet..

April 15th is also my mothers birthday...:D

Nathan April 21, 2009 at 7:55 AM  

(I hope you were serious when you said you welcomed disagreements :) )

Mark,

Isn't the "FairTax" an inherently immoral form of taxation, as it is still a form of theft, much as the current income tax is?

Uncle Sam is basically taking away $1 from person #1 and $99 from person #2, and then distributing the money back in benefits and other forms equally ($50 to person #1 and $50 to person #2). (in reality, it's not equal, but the point is that it is not correlated to the amount paid in taxation)

As long as an inherently immoral form of theft/taxation is in place, person #1 (and all of their friends in that tax bracket) will always vote to increase the size of government, as doing so only increases the benefits to them, as the small minority of people in the $99 tax bracket will pay for the majority of the tax, while much of the money that they pay goes straight into the pockets of the people who pay merely $1 (and yet control the majority of the votes).

Human nature is sinful, so as long as they think they can ignore the moral consequences of their sin, human nature will always compel the majority of the voters who pay the minority of the taxes to vote for people who will increase the size of the government, thereby allowing them to steal from the rich without the "social stigma" that comes with going about it the straight-forward way (sticking a gun in their faces).

Anyway, just a few of my thoughts, on why I think that the "FairTax" is, at it's core, an inherently un-Biblical form of taxation which presupposes that theft is morally justifiable if it is done under the cloak of Uncle Sam.

In your post, you listed 8+ reasons why you preferred the "FairTax", however, I believe you failed to defend it from a Biblical perspective, as you seemed to ignore the moral implications of any given form of taxation, and simply stated "practical" reasons why you favored the system. I would be interested in hearing your defense of it from a Biblical viewpoint, as to how you would overcome the moral objections to this system.

While many people might say that it is "Fair" to steal the fruits of some peoples labor in order to lighten the burden on themselves, I would challenge you to think about whether or not this form of taxation is "Just", Biblical, and Moral.

I miss all the debating we used to do, I'm not as sharp now as I used to be. :)

God bless,

- Nathan

P.S. This was a little peppier then I initially intended, so feel free to not publish this on your blog and reply via email, if you would prefer to do so.

Nathan April 21, 2009 at 8:02 AM  

One more thing,

In a comment you wrote earlier today, you said:

"So, I don’t have a problem with high taxes so long as those taxes have been agreed to (the right to tax, that is) and those being taxed are able to elect those that will be running the government and affecting the rate of taxation."

The flaw in that argument, is that most of the voters who are electing those that are affecting the rate of taxation are in the lower tax bracket, and their votes are simply affecting the minority of voters who are paying the majority of the taxes.

If every voter paid the same amount in taxes, that argument would be valid, but since that is not the case, I don't think that it is necessary a valid argument to make.

Mark Hutchins April 23, 2009 at 8:39 PM  

Nathan,

Thanks for the thought provoking comments, and yes you absolutely right that I should have paid more attention to what the Bible does (or doesn't) say about the issue of taxation before launching into the more technical side of things.

I very much appreciate your pointing that out. :-)

I definitely have a position on what I believe the Bible says in regards to taxation, and I'll try to set it (them) forth in a short post tomorrow. My position isn't really very complicated, so it shouldn't require more than the previously mentioned short post. :-)

Thanks again, Nathan, and no, your post was by no means to peppy. ;-)

Sir Emeth Mimetes April 24, 2009 at 1:33 AM  

Greetings,

I think that Nathan's main premise was that it does not matter how taxes are done, if they are used for the wrong things, then they are wrong. This I agree with.

However, government does need finances for what it is supposed to do: punish crime, defend the nation, and praise righteous workers. That is their sole function, and if the money is used responsibly for that, then it is not stealing. You are simply paying for a service done to you: protection from evil-doers. See Romans 12:17-21 & 13:1-7.

With this said, it is still wrong for government to tax in a wrong way even if it is using the tax money only for the right things. Taxes need to be as neutral as possible: not used to control certain products or benefit certain people (by tax breaks and etc.). If the tax is low enough, this is achieved. But how low can taxes go while still funding the government sufficiently?

Government ought to have only two expenses: judicial and martial. Judicial, if done Biblically, ought to have very little if any expense at all. The military, however, does require quite a bit. But how much? Go look at the CIA World Factbook and see how much the US military is currently spending, even with all its flaws: only 4.6% of the GDP. That is only about two weeks of the year, as compared to several months! And think about it: if you did not have to pay all the other taxes (direct or indirect, business, income, etc.) everybody's income would be much much higher, and so there would be perfectly sufficient to cover any other costs involved with the judicial branch, housing, and etc.

I am not saying that we should do a 4% (non-graduated) income tax (though that might be possible). I am saying that government needs to get out of spending on all the wrong things first, then we can fix the taxes right. For now, the FairTax is an improvement: going in the right direction. Just by its eliminating the IRS alone it is better than what we have now.

Just some of my thoughts.

With joy and peace in Christ,
Sir Emeth Mimetes

http://lawfulnation.pureforum.net

Nathan April 25, 2009 at 8:55 AM  

Actually, my main point was that the form of taxation used is an inherently moral question. Some forms of taxation are wrong for one reason or another (mainly, because they involve theft), while others (I would argue just one form) are Biblically permitted.

Once you surrender the principle that it is morally acceptable for the Government to transfer wealth from one group of people to another, you have already surrendered the principle, and once that is lost, it is very difficult to recover it.

"From each according to his ability, to each according to his need"

That quote, from Karl Marx, in describing the Communist system, sounds strangely familiar, when you compare it with our current income tax structure.

It also fits in well with the proposed "Fair Tax" proposal, as the "Fair" tax would tax the rich disproportionately to the poor, and would thereby (in my opinion) be a Communist-style wealth redistribution scheme to "spread the money around".

Nothing probably demonstrates the theft of this current tax system then the stimulus checks that went out last year.

The rich paid most of the money, but everyone got a stimulus check for the same amount (actually, the theft went farther, as most of the rich didn't get a stimulus check at all, so they were paying for the checks, but got $0 back themselves).

The reason the American public stood for that is that the majority of the voters stood to benefit from siphoning off money from the small minority of the highest taxpayers into their own pockets.

Anyway, looking forward to your post, Mark!

Dan Walker October 21, 2009 at 6:22 PM  

Fairtax is a farce. Its as phoney as that kid in the balloon. It's own leaders know its a farce - they aren't serioius about it.

Five oil guys in texas dreamed this up - and donated 25 million to get it going. Fairtax, org is apparently a result of that money.

Its a farce because it's hiding the way it collects money. They pretend to be able to make the GOVERNMENT pay the highest sales tax on earth.

All government - -every city, every county, every polic department, prison, every state.

Even the FEDERAL government will become a major taxpayer (Page 148, the Fairtax book).

Notice how they barely mention this amazing fact -- because they are HIDING it.

No nation on earth gets most of their money from a tax on the government. Its inanity - its a farce, its a hoax. Its not a serious plan.

You are beingn fooled.

They are not trying to pass this -- no hearings under oath in 12 years? They have 65 sponsors? And they can't get ONE hearing under oath in 12 years???

They KNOW its nonsense. And its been debunked -- real studies have shown that to replace all other federal taxes, the rate would NOT be 23% -- it would be 90%.

Thats right 90%. No wonder Fairtax can't tell the truth -- if they told you it would be 90%, even the stupid people would not go for it.

Why do you think NO corporation has come out for this -- in 12 years!!! NOT ONE. This would get rid of ALL corporate taxes -- but not ONE has come out for it??? Why not?

Because its bogus nonsense, thats why.

Why did National Association of retailers say it would DECIMATE the economy - because a 60-90% sales tax would be an enconomy crusher.

Keep in miind, Fairtax KNOWS all this. This is not a well meaning plan thats simply mistake. This is a FARCE a hoax, its utter nonsense.

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