Changes

Thus, instead of taxing "income", the Fair Tax would tax expenses. This is known as a consumption tax -- a method for taxing income on the back end, when the money is spent, rather than when it is earned. The estimated rate for the Fair Tax would be 23 percent<ref> "Embedded Taxes Change Fair Tax Analysis",http://www.roanoke.com/editorials/commentary/wb/wb/xp-51569</ref>, although some critics say it would be closer to 33%.<ref> http://www.factcheck.org/taxes/unspinning_the_fairtax.html</ref><br />

Thus, instead of taxing "income", the FairTax would tax expenses. This is known as a consumption tax -- a method for taxing income on the back end, when the money is spent, rather than when it is earned. The estimated rate for the FairTax would be 23 percent<ref> "Embedded Taxes Change Fair Tax Analysis",http://www.roanoke.com/editorials/commentary/wb/wb/xp-51569</ref>, although some critics say it would be closer to 33%.<ref> http://www.factcheck.org/taxes/unspinning_the_fairtax.html</ref><br />

Though frequently advertised by supporters as a "voluntary" tax, this is not entirely true. Consumers can indeed forestall the tax by choosing not to spend money, or by electing to purchase only second-hand goods (which are not taxed under this proposal). However, at some point, all consumers must purchase new goods and services, including various necessities such as health care, food, fuel, phone service, etc., at which point the tax would no longer be "voluntary" but mandatory. To help counter this effect -- and to make the tax more "fair" -- expenses such as those listed would be offset to a certain degree by a "prebate" -- a monthly check issued by the government to each worker. However, given the income level of most Americans, the vast majority of citizens (about 90%<ref>http://pubdb3.census.gov/macro/032007/pov/new04_100_01.htm</ref>) would end up paying some measure of tax on these items, prebate or no. The Fair Tax would therefore operate in direct conflict with the Constitution, which prohibits Direct taxes (those paid on the necessities of life, or on any [[unalienable right]]) without apportionment. Legal challenges to the tax would probably emerge shortly after its passage and lead to nullification by the U.S. Supreme Court for violating Article I, Section 9. (See Criticism below.)

Though frequently advertised by supporters as a "voluntary" tax, this is not entirely true. Consumers can indeed forestall the tax by choosing not to spend money, or by electing to purchase only second-hand goods (which are not taxed under this proposal). However, at some point, all consumers must purchase new goods and services, including various necessities such as health care, food, fuel, phone service, etc., at which point the tax would no longer be "voluntary" but mandatory. To help counter this effect -- and to make the tax more "fair" -- expenses such as those listed would be offset to a certain degree by a "prebate" -- a monthly check issued by the government to each worker. However, given the income level of most Americans, the vast majority of citizens (about 90%<ref>http://pubdb3.census.gov/macro/032007/pov/new04_100_01.htm</ref>) would end up paying some measure of tax on these items, prebate or no. The FairTax would therefore operate in direct conflict with the Constitution, which prohibits Direct taxes (those paid on the necessities of life, or on any [[unalienable right]]) without apportionment. Legal challenges to the tax would probably emerge shortly after its passage and lead to nullification by the U.S. Supreme Court for violating Article I, Section 9. (See Criticism below.)

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The Fair Tax was originally the brain-child of the [[Scientologist]]s, as part of their ongoing battle with the IRS. The most popular of initial plans for the Fair Tax was designed by [[Americans for Fair Taxation]] (AFFT), which is led by businessman Leo Linbeck<ref> Just how fair is the ‘FairTax’ CNN Money, September 2005,  http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/</ref>. Linbeck stated that Americans have to pressure the government to come up with a better way of taxation, he said, “It is painfully obvious that [[Washington, D.C.]] insiders so closely linked with the status quo cannot be trusted to overturn the corrupt system of federal taxation. This effort will have to be driven by the American people<ref>Americans For Fair Taxation http://boortz.com/nuze/200510/10132005.html</ref>."  The organization hired experts to look into an idea for a better tax system, they spent 23 million dollars in coming up with the idea of the Fair Tax. Their findings were combined into a book, “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” which Linbeck co-authored with Republican Congressman John Linder<ref> “The Fair Tax Book”,2005, http://www.amazon.com/Fair-Tax-Book-Saying-Goodbye/dp/0060875496/ref=sr_1_1/102-3275846-3467353?ie=UTF8&s=books&qid=1184106196&sr=1-1</ref>.

The Fair Tax was originally the brain-child of the [[Scientologist]]s, as part of their ongoing battle with the IRS. The most popular of initial plans for the Fair Tax was designed by [[Americans for Fair Taxation]] (AFFT), which is led by businessman Leo Linbeck<ref> Just how fair is the ‘FairTax’ CNN Money, September 2005,  http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/</ref>. Linbeck stated that Americans have to pressure the government to come up with a better way of taxation, he said, “It is painfully obvious that [[Washington, D.C.]] insiders so closely linked with the status quo cannot be trusted to overturn the corrupt system of federal taxation. This effort will have to be driven by the American people<ref>Americans For Fair Taxation http://boortz.com/nuze/200510/10132005.html</ref>."  The organization hired experts to look into an idea for a better tax system, they spent 23 million dollars in coming up with the idea of the Fair Tax. Their findings were combined into a book, “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” which Linbeck co-authored with Republican Congressman John Linder<ref> “The Fair Tax Book”,2005, http://www.amazon.com/Fair-Tax-Book-Saying-Goodbye/dp/0060875496/ref=sr_1_1/102-3275846-3467353?ie=UTF8&s=books&qid=1184106196&sr=1-1</ref>.

The Fair Tax became popular among free market [[conservative]]s, [[libertarian]]s, and some economist in recent years. The complication and wasted bureaucracy of the [[Internal Revenue Service]], government pressure on citizens to reveal information and records, and the loopholes in the current tax system created the incentive to look for a new way of taxation in the United States. Some [[Democrats]] also sought a tax system that would rid them current income tax, which they claim to be discriminate.

The FairTax became popular among free market [[conservative]]s, [[libertarian]]s, and some economist in recent years. The complication and wasted bureaucracy of the [[Internal Revenue Service]], government pressure on citizens to reveal information and records, and the loopholes in the current tax system created the incentive to look for a new way of taxation in the United States. Some [[Democrats]] also sought a tax system that would rid them current income tax, which they claim to be discriminate.

In the last 20 years the [[United States]] tax system has been changed over 14,000 times, this has led to an abundance of complexities which lead to its being an inefficient system. In 2003, United States Senator [[Saxby Chambliss]], a [[Republican]], and Senator [[Zell Miller]] a Democrat; introduced a by-partisan version of the Fair Tax. Although the bill had some support in the [[Senate]], it eventually lost in a 50-50. Senator [[Sam Brownback]] later stated the challenges of tax reform, “When you take (the tax code) on straight on, you take on every lobbyist,"

In the last 20 years the [[United States]] tax system has been changed over 14,000 times, this has led to an abundance of complexities which lead to its being an inefficient system. In 2003, United States Senator [[Saxby Chambliss]], a [[Republican]], and Senator [[Zell Miller]] a Democrat; introduced a by-partisan version of the Fair Tax. Although the bill had some support in the [[Senate]], it eventually lost in a 50-50. Senator [[Sam Brownback]] later stated the challenges of tax reform, “When you take (the tax code) on straight on, you take on every lobbyist,"

Former Federal Reserve Chairman, [[Alan Greenspan]], called for a federal sales tax to replace the broken income tax in 2005.  "Since the exemplary 1986 reform, the tax code has drifted back to be overly complicated and burdened by higher marginal rates and by many special provisions that have undesirably narrowed the tax base," Greenspan stated at a Presidential Advisory counsel<ref>Greenspan: "Consumption Tax COuld Help Economy",http://www.foxnews.com/story/0,2933,149298,00.html</ref>.  

Former Federal Reserve Chairman, [[Alan Greenspan]], called for a federal sales tax to replace the broken income tax in 2005.  "Since the exemplary 1986 reform, the tax code has drifted back to be overly complicated and burdened by higher marginal rates and by many special provisions that have undesirably narrowed the tax base," Greenspan stated at a Presidential Advisory counsel<ref>Greenspan: "Consumption Tax COuld Help Economy",http://www.foxnews.com/story/0,2933,149298,00.html</ref>.  

In 2005 congress created a bill to enact the Fair Tax (H.R. 25; Senate Bill 1943), it had the support of more then 54 co-sponsors, and both Senate and House minority leaders [[Dennis Hassert]] and [[Tom DeLay]]<ref>“The FairTax: A Trogan Horse For America,” Jews For Preservation of Firearms Ownership,  http://www.jpfo.org/fairtax.htm#fn1</ref>. Although the bill received the most support ever for any fundamental tax reform bill, it failed to pass. After the elections of 2004, Georgia Republican Congressman, [[John Linder]], reintroduced the FairTax on the first day of the 109th congress<ref> “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>. Congressman Linder stated before congress, “The time is ripe for fundamental tax and a completely new Federal tax regime. I am pleased to reintroduce my Fair Tax proposal today reform, and look forward to the Congress creating a fairer, simpler tax system that advances our core goals of lower taxes and more freedom for our citizens."<ref> “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>.”

In 2005 congress created a bill to enact the FairTax (H.R. 25; Senate Bill 1943), it had the support of more then 54 co-sponsors, and both Senate and House minority leaders [[Dennis Hassert]] and [[Tom DeLay]]<ref>“The FairTax: A Trogan Horse For America,” Jews For Preservation of Firearms Ownership,  http://www.jpfo.org/fairtax.htm#fn1</ref>. Although the bill received the most support ever for any fundamental tax reform bill, it failed to pass. After the elections of 2004, Georgia Republican Congressman, [[John Linder]], reintroduced the FairTax on the first day of the 109th congress<ref> “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>. Congressman Linder stated before congress, “The time is ripe for fundamental tax and a completely new Federal tax regime. I am pleased to reintroduce my Fair Tax proposal today reform, and look forward to the Congress creating a fairer, simpler tax system that advances our core goals of lower taxes and more freedom for our citizens."<ref> “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>.”

In 2007 support for the FairTax bill grew to include 60 co-sponsors<ref>FairTax Gains Support, http://www.fairtaxblog.com/20070508/record-sixty-co-sponsors-for-fairtax-bill-hr-25/</ref>.  

In 2007 support for the FairTax bill grew to include 60 co-sponsors<ref>FairTax Gains Support, http://www.fairtaxblog.com/20070508/record-sixty-co-sponsors-for-fairtax-bill-hr-25/</ref>.  

==Criticism==  

==Criticism==  

Republican presidential candidate [[Rudy Giuliani]] criticized the Fair Tax when he addressed a group at the [[University of Florida]] in July, 2007<ref> “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>: "I don't think a Fair Tax is realistic change for America. Our economy is dependent upon the way our tax system operates<ref> “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>."

*None of the 2008 Democratic presidential candidates support the FairTax, although [[Mike Gravel]] has indicated he supports a new kind of system based on consumption (expense) rather than income.

None of the 2008 Democratic presidential candidates support the Fair Tax either, although [[Mike Gravel]] has indicated he supports a new kind of system based on consumption (expense) rather than income.

*Republican presidential candidate [[Rudy Giuliani]] criticized the FairTax when he addressed a group at the [[University of Florida]] in July, 2007<ref> “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>: "I don't think a Fair Tax is realistic change for America. Our economy is dependent upon the way our tax system operates<ref> “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>."

Aside from political criticism, however, the FairTax suffers from serious constitutional infirmities. Supporters have tried to paint the tax as an "[[excise]]". But this is wrong. The constitutional definition of an [[excise]] is a tax that is strictly limited to '''privileged''' or '''luxury''' goods and activities. The writings of the Founding Fathers, as well as numerous U.S. Supreme Court and lower court rulings, confirm this definition.<ref>http://www.conservapedia.com/Excise</ref> However, the FairTax encumbers '''necessities''' ''in addition to'' privilege and luxury items, thus making it a '''Direct tax''' within the constitutional meaning of the term. Unlike true [[excise]]s, the FairTax cannot be "avoided" because it taxes things which are necessary to live. These include food, clothing, housing, transportation, medicine, health care, arms for self-defense, phone service, sundries, education, etc. Any tax that encumbers such items must be apportioned among the states, or it violates the Constitution.

*Aside from a lack of enthusiasm among most politicians, the FairTax also suffers from serious constitutional infirmities. Supporters have tried to paint the tax as an "[[excise]]". But this is wrong. The constitutional definition of an [[excise]] is a tax that is strictly limited to '''privileged''' or '''luxury''' goods and activities. The writings of the Founding Fathers, as well as numerous U.S. Supreme Court and lower court rulings, confirm this definition.<ref>http://www.conservapedia.com/Excise</ref> However, the FairTax encumbers '''necessities''' ''in addition to'' privilege and luxury items, thus making it a '''Direct tax''' within the constitutional meaning of the term. Unlike true [[excise]]s, the FairTax cannot be "avoided" because it taxes things which are necessary to live. These include food, clothing, housing, transportation, medicine, health care, arms for self-defense, phone service, sundries, education, etc. Any tax that encumbers such items must be apportioned among the states, or it violates the Constitution.<br />Although proponents suggest that necessities are effectively relieved from the tax by virtue of the prebate, the fact remains that necessities ''are'' taxed. Furthermore, once an individual's spending on necessities exceeds the poverty level, the prebate no longer offsets the tax, and the tax ''operates fully'' as an unapportioned Direct tax, in violation of the Constitution. In ''Brushaber v. Union Pacific Railroad Co.'' (1916), the Supreme Court ruled that whenever any "[[excise]]" morphs into a tax on items of common right (such as anything necessary to preserve and carry out a normal life) "the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it." Regardless of whether the FairTax is called an "[[excise]]," it is, in substance, a Direct tax which cannot be apportioned among the states. It is therefore unconstitutional.

Although proponents suggest that necessities are effectively relieved from the tax by virtue of the prebate, the fact remains that necessities ''are'' taxed. Furthermore, once an individual's spending on necessities exceeds the poverty level, the prebate no longer offsets the tax, and the tax ''operates fully'' as an unapportioned Direct tax, in violation of the Constitution. In ''Brushaber v. Union Pacific Railroad Co.'' (1916), the Supreme Court ruled that whenever any "[[excise]]" morphs into a tax on items of common right (such as anything necessary to preserve and carry out a normal life) "the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it." Regardless of whether the FairTax is called an "[[excise]]," it is, in substance, a Direct tax which cannot be apportioned among the states. It is therefore unconstitutional.

*Another problem is that the FairTax would not close all loopholes. For example, any purchases made overseas, including money spent on investments, would not be subject to the tax. This could lead to the movement of U.S. dollars offshore, accompanied by individual and corporate "hoarding," and a loss of revenue for the government.

Another problem is that the FairTax would not close all loopholes. For example, any purchases made overseas, including money spent on investments, would not be subject to the tax. This could lead to the movement of U.S. dollars offshore, "hoarding," and a loss of revenue for the government.  

*Further, in an effort to avoid the tax, many people would be inclined to buy only second-hand goods. This would reduce the demand for new goods and affect the growth of the economy.

Finally, the FairTax shares at least one major flaw with the current income tax system: There is no cap on the rate that might be imposed by Congress. If the FairTax were to become law, the rate might be initially established at 23%, as proponents believe. But nothing in the FairTax proposal prevents Congress from raising the rate to 30%, or even higher. Given the government's proclivity for spending money, an eventual increase in the FairTax rate, were the measure to pass, seems inevitable.<br />

*Finally, the FairTax shares at least one major flaw with the current income tax system: There is no cap on the rate that might be imposed by Congress. If the FairTax were to become law, the rate might be initially established at 23%, as proponents believe. But nothing in the FairTax proposal prevents Congress from raising the rate to 30%, or even higher. Given the government's proclivity for spending money, an eventual increase in the FairTax rate, were the measure to pass, seems inevitable.<br />