Fair Tax

A pro FairTax rally in Florida

The Fair Tax (FairTax) is a tax proposal that replaces all federal income taxes, including; corporate income taxes, gifts, estate, capital gains, alternative minimum, Social Security, Medicare, and self employment taxes, with a federal retail sales tax.

Instead of being taxed on what citizens earn, the Fair Tax taxes on what citizens buy, this is known as a voluntary consumption tax. The estimated rate for the Fair Tax is 23 percent. One main proponent of the FairTax is Republican presidential primary contender and former Arkansas Governor, Mike Huckabee.

Proposal

The basic Fair Tax system includes the following;

• Abolishment of the Internal Revenue Service (IRS).
• Abolishment of personal income taxes.
• Removal of the 16th Amendment.
• A probate to cover those under the federal poverty level..
• Closes all loopholes and brings fairness to taxation
• Reimburses the tax on purchases of basic necessities
• Enables retirees to keep their entire pension
• Enables workers to keep their entire paycheck

History

1986-2005

Congressman John Linder, one of the strongest proponents for the FairTax, illustrates the size of the current tax system vs the FairTax method

The Fair Tax was originally the brain-child of the Scientologists, 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. 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." 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.

The Fair Tax became popular among free market conservatives, libertarians, 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,"

2005-2007

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.

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. 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. 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.".”

In 2007 support for the FairTax bill has grown to include 60 co-sponsors.

One of the most outspoken supporters for the Fair Tax is Republican presidential primary candidate, Mike Huckabee, he stated that the Fair Tax, "would put the IRS out of business, but put Americans in business."

Support

A FairTax bus during a rally at the 2007 Republican Iowa Straw Poll.

The main support for the Fair Tax comes from the Republican Party as well as Libertarians. Conservatives have continued to push for Republican presidential candidates to support the congressional Fair Tax bill, one such group was set up in Indiana, ‘Hoosier for Fair Taxation’. .

All Democrats’ presidential primary candidates have said that they do not support the Fair Tax proposal currently in congress. Mike Huckabee has made a national sales tax as one of his main platforms. Economist, such as Alan Greenspan, have also shown support for the FairTax.

Criticism

Republican presidential candidate, Rudy Giuliani, criticized the Fair Tax when addressing a group at the University of Florida in July, 2007. The former mayor stated that although he had to “study it some more I don't think a fair tax is realistic change for America. Our economy is dependent upon the way our tax system operates.."

Proponents of the tax argue that the Fair Tax would be more practical then the current income tax, which includes 59,999 pages of the tax code documents that lobbyist have worked through congress.

External Links

• Americans for Fair Taxation