Posted by
Georgiaboy on Sunday, September 10, 2006 5:39:44 PM
Often when I talk with people about the Fairtax they will like the idea...but. They like the idea...but, they are worried about the transitions. They like the idea...but, they don't want people getting checks from the government. They like the idea...but, they think it is regressive. Any number of fairly small objections. You may be one of these people. What I want to do is make you think from a different perspective.
You are a delegate to a national tax code convention. A major computer crash and fire in Washington DC wiped the tax code and no one remembers what it was like (Just play a long, I know it is far fetched :)
First, a delegate, who you know to be an accountant, presents a plan for a national income tax. The tax will be steeply graduated so it punishes work. It will be withheld from your paycheck each month, so most people will not know how much they are paying. It taxes capital, slowing our economic growth and is so burdensome that it forces business to work outside the US. The delegate instructs you that the Founding Fathers did not know what they were doing when they specifically made direct taxes unconstitutional.
Furthermore, the tax code will be so complex that Americans will spend billions of dollars and millions of hours trying to decipher it. If you mess up your tax return, the government will spend months harassing you, invading your privacy, and may fine you large amounts. In fact, the code will be so complex, even professionals will not understand it and prominent tax filing firms will misfile their own taxes. Unfortunately, the harsh tax compliance agency will not be able to prevent a large underground cash economy from going untaxed. The delegate excitedly tells you that the government will be able to raises taxes on certain minorities of classes to ensure that they do not have enough votes to prevent the tax increase. This way, half of the country will pay over 96% of the taxes. As your eyes begin to glaze over, a second delegate presents a plan.
This plan is for a national retail sales tax. It will be 23% out of every dollar you spend on new, retail items. You can determine the amount of tax you pay by spending more or less money. Education, investment, and used items are not taxed. You wonder if this system will be rough on the poor, but the delegate explains that each month a check will be mailed to every family, reimbursing them for the tax they paid on spending up to the poverty level. This ensures that dirt poor people pay nothing in taxes, poor people pay only a little, and middle class people only pay around 20%. You will keep your entire paycheck and will always know exactly how much you have paid in taxes.
The delegate notes that economists, including Alan Greenspan, agree that a consumption tax is the best for economic growth. American goods become very competitive overseas because they were produced without any taxes on the company. Companies abroad rush to relocate in America where they do not pay any corporate taxes. Additionally, foreign investments flow into US stock markets providing billions in capital for economic expansion. You wonder briefly how the tax rate is so much lower than in the previous proposal, but then you remember than consumption is a broader and more stable tax base than income, you are also taxing the underground economy of drug dealer and illegal immigrants; even foreign tourists now pay American taxes. Greater economic growth also helps reduce the rate.
The new tax will also be harder to raise. You cannot raise it on only 10% of the population. You will not have to file tax returns anymore and your freedom and privacy is respected. Lobbyists cannot work crooked deals to benefit special interests. But, then the delegate finishes with the real kicker, you will not pay much more for your retail goods than under the previous tax plan. That plan buries embedded taxes in all retail goods of around 20%. This is not surprising, corporations cannot pay taxes, they are always passed onto shareholders, consumers, or employees--a very simple law of economics.
The two delegates sit down and everyone prepares to vote. Which plan do you vote for?
You see, you are objecting to a plan that is not perfect, but in the process you are keeping a tax code that makes Godzilla look friendly. Don't be afraid of change. ELIMINATE THE IRS.