wodke-hawkinson.com Blog Musings from deviant minds (Or how writers think)

10Nov/10

A Fair Tax for Americans

Dollar by Anna Cervova

How about a tax on what you spend, instead of what you earn? This would mean you could work three jobs, if you were so inclined, and pay not a penny in income taxes. You could keep all your money. Then, if you decided to save half of it, you would pay no taxes on the interest. The only tax you would pay would be when you buy something. You would not be punished for being industrious and frugal. Under this system, people with more money to spend would pay more taxes. What could be more fair?

Under a consumption tax such as this one, people who do not normally pay income taxes right now would then have to pay taxes. For instance, illegal aliens who are currently paid under the table with no income taxes taken out of their pay would pay every time they buy groceries, clothing, electronics, cars, or any other item. Drug pushers would pay. Obviously drug peddlers don’t pay income tax on their illegal earnings, but under a consumption tax, they would have to pay each time they bought anything. Even drug dealers have to have clothes, groceries, utilities and transportation.

The current tax system has for years been used to reward certain behaviors and punish others. For the average hard-working American, success is punished. If you work more, you pay more. If you invest in something and make a profit, you are taxed for it. Only the most sophisticated among us are able to manipulate tax loopholes to avoid this. The tax system is used to punish or reward certain behaviors also, such as marriage and family size. Under a consumption tax, this meddling in our personal lives would stop or at least be significantly reduced. Success would not be punished, and even the rich could not avoid paying taxes because taxes would be paid every time a purchase is made.

I’m not talking about a VAT, which is a value-added tax, a punitive tax placed on a product at every level of production. Some politicians want a VAT in ADDITION to the income taxes we already pay. This is simply outrageous. No, we want nothing to do with a Value Added Tax.

Proponents of a consumption tax such as this one believe poor people should not be unfairly burdened by higher taxes on necessities. Therefore, households would receive a monthly check for the amount of tax they have to pay on necessities. It would be nice to receive a check every month, wouldn’t it? This payment is called a "prebate". And right now, it is estimated that it would be over $500.00 per month per family.

Proponents also say the price of goods would stay relatively the same because all the current embedded taxes would be eliminated. Now, when we purchase something, the price already includes secret taxes, taxes we shoppers don't know about. These would go away, reducing the price of the item. Once the consumption tax is added on, the price would be pretty much the same as it was before.

The elimination of capital gains taxes, death taxes, income taxes, and corporate taxes is predicted to result in a boom in business in the United States. Companies that have sent production overseas because of restrictive tax rates here could return to the USA. Foreign businesses would come to the USA because it would be cheaper for them to operate. Jobs would grow and the economy would surge.

Opponents of a consumption tax lie. They say it is a 23% sales tax and make it sound like it is in addition to income taxes, instead of replacing income and other taxes. They fear it because it takes control away from the federal government and gives it back to the people. Politicians, by and large, are unwilling to give up that power.

The enormous, cumbersome, and intrusive IRS would be phased out, which would save our country billions of dollars. A huge amount of resources are expended to enforce the current tax code. Wouldn’t it be nice if our government (via us, the taxpayers) didn’t need to spend that money anymore?

A consumption tax of this type would be the fairest way for the government to collect the revenue it needs to operate. Because of that, this plan is called the FairTax. To learn more about the FairTax, visit: http://www.fairtax.org/site/PageServer?pagename=about_main

A few years ago, I was working fulltime plus I had a sewing business. I saved and saved until I had enough money to put a down payment on a small house. I fixed that house up and then resold it, making a profit. Now at that time, I was already giving the federal government money from my regular paycheck in the form of payroll taxes. And they also wanted their share of my profit from my investment house. It seemed to me that I was being punished for working hard. It seemed to me that the government did not want me to get ahead; they just stuck their greedy hands into every part of my life. I resented it. But I had no choice. Taxes ate up almost a third of my profit on the investment house. How fair is that? Under the FairTax, that wouldn’t have happened.

This is why I favor the FairTax. I favor rewarding success. I favor putting people in charge of their own destinies. I favor getting politicians out of the business of picking winners and losers or manipulating behaviors. I favor everyone paying their share of taxes, even if they are involved in nefarious activities or in this country illegally. It’s time to stop the system that punishes the most productive among us.

If you like the idea of a FairTax, contact your representative in Washington and encourage them to support this legislation. I say we give it a test in one state and see how it works. Just for a few years, give one state a chance to prove or disprove the FairTax. Suspend income and other taxes in that state for the duration of the experiment, and implement the FairTax. Then we would have the answers to show whether a FairTax will work or not.

-kw

Photo by Anna Cervova