Difference between revisions of "FairTax"
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[[Image:FairTaxRally.jpg|thumb|350px|A pro FairTax rally in Florida]] | [[Image:FairTaxRally.jpg|thumb|350px|A pro FairTax rally in Florida]] | ||
| − | '''The FairTax''' is a tax proposal that would replace all federal [[income taxes]] -- including corporate, gift, estate, capital gains, alternative minimum, [[Social Security]], [[Medicare]], and self employment taxes -- with a federal [[sales tax]]. The tax would be paid on the purchase of all new goods and services, and immediately collected at point of sale. <ref> Americans For Fair Taxation, “About the FairTax,” http://www.fairtax.org/site/PageServer?pagename=about_main</ref> | + | '''The FairTax''' is a tax proposal that would replace all federal [[income taxes]] -- including corporate, gift, estate, capital gains, alternative minimum, [[Social Security]], [[Medicare]], and self employment taxes -- with a federal [[sales tax]]. The tax would be paid on the purchase of all new goods and services, and would be immediately collected at point of sale. <ref> Americans For Fair Taxation, “About the FairTax,” http://www.fairtax.org/site/PageServer?pagename=about_main</ref> |
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| + | Thus, instead of taxing "income", the Fair Tax would tax expenses. This is known as a consumption tax. 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%.<br /> | ||
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| + | Though frequently touted 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 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.) | ||
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==Proposal== | ==Proposal== | ||
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[[Image:Fairtaxb.jpg|right|thumb|200px| A FairTax bus during a rally at the 2007 [[Republican]] [[Iowa Straw Poll]].]] | [[Image:Fairtaxb.jpg|right|thumb|200px| A FairTax bus during a rally at the 2007 [[Republican]] [[Iowa Straw Poll]].]] | ||
| − | Most of the support for the FairTax comes from the [[Republican Party]] and the [[Libertarian]]s. A significant number of [[Conservative]]s want Republican presidential candidates to support the FairTax bill, including one group | + | Most of the support for the FairTax comes from the [[Republican Party]] and the [[Libertarian]]s. A significant number of [[Conservative]]s want Republican presidential candidates to support the FairTax bill, including one Indiana group called ‘Hoosiers for Fair Taxation’<ref>”FairTax Supporters Vent Frustration”, June 2007, http://www.theindychannel.com/news/13651607/detail.html</ref>. <ref>”FairTaxer's continue to “flex their muscles”, July 2007, http://www.fairtax.org/site/PageServer?pagename=news_feature</ref>. Former Arkansas governor and presidential candidate [[Mike Huckabee]] made passage of a national sales tax a part of his platform during his recent bid for office. Former Federal Reserve chief [[Alan Greenspan]] also exhibited some support for the FairTax in a recent interview.<ref>Greenspan: Consumption Tax could Help Economy, Fox News, March 2005, http://www.foxnews.com/story/0,2933,149298,00.html</ref> |
Proponents of the FairTax argue it would be more practical than the current system, which includes over 60,000 pages of tax code.<ref> 67,204-Page Code Confounds Taxpayers, Yet Congress Sits By, USA Today, http://www.usatoday.com/news/opinion/2007-04-03-edit_N.htm?csp=34 </ref>. | Proponents of the FairTax argue it would be more practical than the current system, which includes over 60,000 pages of tax code.<ref> 67,204-Page Code Confounds Taxpayers, Yet Congress Sits By, USA Today, http://www.usatoday.com/news/opinion/2007-04-03-edit_N.htm?csp=34 </ref>. | ||
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==Criticism== | ==Criticism== | ||
| − | Republican presidential candidate | + | Republican presidential candidate [[Rudy Giuliani]] criticized the Fair Tax when addressing 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>. The former mayor stated: "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>." |
| − | All 2008 Democratic presidential candidates have | + | All 2008 Democratic presidential candidates have stated they do not support the current Fair Tax proposal, although [[Mike Gravel]] has indicated he supports a new kind of system based around consumption (expense) rather than income. |
| − | Aside from political criticism, the Fair Tax proposal also suffers from serious constitutional infirmities. | + | Aside from political criticism, however, the Fair Tax proposal also suffers from serious constitutional infirmities. |
==External Links== | ==External Links== | ||
Revision as of 04:39, April 18, 2008
The FairTax is a tax proposal that would replace all federal income taxes -- including corporate, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self employment taxes -- with a federal sales tax. The tax would be paid on the purchase of all new goods and services, and would be immediately collected at point of sale. [1]
Thus, instead of taxing "income", the Fair Tax would tax expenses. This is known as a consumption tax. The estimated rate for the Fair Tax would be 23 percent[2], although some critics say it would be closer to 33%.
Though frequently touted 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 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.)
Proposal
If passed, the Fair Tax would accomplish the following[3]:
- Abolish the Internal Revenue Service (IRS).
- Abolish personal income taxes.
- Repeal the 16th Amendment.
- Provide each worker a monthly prebate, equal to the tax on "poverty level" income. [4]
- Close many loopholes under the current system.
- Enable retirees to receive their full pension, untaxed, until they spend it.
- Enable workers to keep their entire paycheck, untaxed, until they spend it.
History
1986-2005
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[5]. 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[6]." 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[7].
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[8].
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[9]. 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[10]. 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."[11].”
In 2007 support for the FairTax bill has grown to include 60 co-sponsors[12].
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[13]."
Support
Most of the support for the FairTax comes from the Republican Party and the Libertarians. A significant number of Conservatives want Republican presidential candidates to support the FairTax bill, including one Indiana group called ‘Hoosiers for Fair Taxation’[14]. [15]. Former Arkansas governor and presidential candidate Mike Huckabee made passage of a national sales tax a part of his platform during his recent bid for office. Former Federal Reserve chief Alan Greenspan also exhibited some support for the FairTax in a recent interview.[16]
Proponents of the FairTax argue it would be more practical than the current system, which includes over 60,000 pages of tax code.[17].
Criticism
Republican presidential candidate Rudy Giuliani criticized the Fair Tax when addressing a group at the University of Florida in July, 2007[18]. The former mayor stated: "I don't think a Fair Tax is realistic change for America. Our economy is dependent upon the way our tax system operates[19]."
All 2008 Democratic presidential candidates have stated they do not support the current Fair Tax proposal, although Mike Gravel has indicated he supports a new kind of system based around consumption (expense) rather than income.
Aside from political criticism, however, the Fair Tax proposal also suffers from serious constitutional infirmities.
External Links
References
- ↑ Americans For Fair Taxation, “About the FairTax,” http://www.fairtax.org/site/PageServer?pagename=about_main
- ↑ "Embedded Taxes Change Fair Tax Analysis",http://www.roanoke.com/editorials/commentary/wb/wb/xp-51569
- ↑ American For Fair Taxation, http://www.fairtax.org/site/PageServer?pagename=about_main
- ↑ Just how fair is the ‘Fair Tax’ CNN Money, September 2005, http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/
- ↑ Just how fair is the ‘FairTax’ CNN Money, September 2005, http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/
- ↑ Americans For Fair Taxation http://boortz.com/nuze/200510/10132005.html
- ↑ “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
- ↑ Greenspan: "Consumption Tax COuld Help Economy",http://www.foxnews.com/story/0,2933,149298,00.html
- ↑ “The FairTax: A Trogan Horse For America,” Jews For Preservation of Firearms Ownership, http://www.jpfo.org/fairtax.htm#fn1
- ↑ “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128
- ↑ “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128
- ↑ FairTax Gains Support, http://www.fairtaxblog.com/20070508/record-sixty-co-sponsors-for-fairtax-bill-hr-25/
- ↑ Massachusetts For Mike Huckabee, http://massachusettsforhuckabee.blogspot.com/search/label/Tax%20Plan
- ↑ ”FairTax Supporters Vent Frustration”, June 2007, http://www.theindychannel.com/news/13651607/detail.html
- ↑ ”FairTaxer's continue to “flex their muscles”, July 2007, http://www.fairtax.org/site/PageServer?pagename=news_feature
- ↑ Greenspan: Consumption Tax could Help Economy, Fox News, March 2005, http://www.foxnews.com/story/0,2933,149298,00.html
- ↑ 67,204-Page Code Confounds Taxpayers, Yet Congress Sits By, USA Today, http://www.usatoday.com/news/opinion/2007-04-03-edit_N.htm?csp=34
- ↑ “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html
- ↑ “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html