In its present form, the tax code penalizes success. The more a person succeeds financially, the more the government taxes him. This practice takes funds out of the hands of people who have shown they know how to use them. It also pits one group against another through envy, making prosperity unpopular. Leaving funds in the hands of individuals promotes success because it allows them to use them as they want. The United States still stands as a bastion of individual freedom and opportunity. Tax reduction gives individuals back greater freedom (and responsibility) for choosing how they live their lives. Tax cuts represent an increase in the standard of living, and they stimulate the economy through increased spending, investing, and saving. Individuals built and rebuilt this nation time and again. The more the government raises taxes to build government programs to solve problems, the less money individuals have to implement plans privately. Program after program created in the private sector have outperformed government programs designed to achieve the same thing. Our government has grown too large, and the only way to downsize government is to cut its resources.
The Fair Tax represents the best idea of how to put more dollars back into the hands of consumers. It is not, as some critics assume, just a new tax. It is a tax to replace all forms of federal income and payroll taxes. To quote the website:
"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 1025) 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."
I want to cover a few points of why this tax is not bad for the poor, and what some of the language means.
1) As it states, this tax is "progressive", which means it taxes the wealthy more than the poor (a regressive tax taxes the poor more). How is it progressive? By giving "prebates" to all citizens, only those who use up their prebate actually pay taxes.
2) What is a prebate? The government will issue checks to every individual or family based on family size that will be enough to cover taxes up to the level of poverty (as determined by the government). Those funds reimburse everyone before the funds are actually spent - thus the term PREbate. Once those funds have been spent, then any spending on new goods will be taxed. Yes, the Fair Tax is only paid on new items (just like state sales tax), so those who want to avoid the tax can buy used goods.
3) By eliminating all other government taxes, individuals have their entire paycheck to spend, giving them more choices in where their money goes.
4) The 23% tax rate sounds high, but after corporations cease paying taxes (often 40-50% of income) prices will drop more than enough to compensate for the tax.
5) Eliminating the current tax code will remove $265 billion in costs to maintain the current tax code. Since sales taxes are already handled by state agencies, a much smaller cost will be involved in implementing the new federal tax.
6) The Fair Tax legislation involves repealing the 16th Amendment which allows a federal income tax, so (despite what critics say) without a new amendment being passed to replace it, the federal government could not simply put back in the income tax.
Anyone interested in a program that would provide more funding, remove more government waste, and return more individual freedom, please read up on the Fair Tax at FairTax.org. The "About'>http://www.fairtax.org/site/PageServer?pagename=about_main/">About the Fair Tax" link is a good place to start, especially the FairTax Five towards the bottom of that page.
This tax does not necessarily eliminate government spending, because it better funds the government. Still, that makes it a wonderful idea for both parties to get behind - it helps the poor and wealthy alike, funds all the programs that both sides are so fond of, and spurs the economy to new heights. By giving the money back to the people, the country can see just how strong the power of one is.