In the debate regarding the national FairTax, proposed as a replacement for federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes, it would appear that, while it isn’t bliss, ignorance is certainly rampant.
First, the FairTax is progressive. At the beginning of each month, each legal household receives a tax refund in anticipation of the coming month’s expenditures called a “pre-bate.” The amount of this check is based on the federal poverty guideline and insures that the first $22,500 of spending is exempt from taxes.
Second, the FairTax is a graduated tax, based on a household’s level of spending. Households that fall below the poverty line pay no taxes, while a family of four spending at the $58,280 level would have an effective tax rate of 11.5%, compared to a 17% effective rate under the current system; the more that is spent, the more that figure would increase to a maximum of 23%. So contrary to what several have asserted, that middle or lower class earners will bear the brunt of this taxation, this is clearly not the case.
Third, the FairTax, by doing away with corporate income taxes, helps once again draw business to the United States because of the lower cost to conduct business. It does away with the need to use tax abatements as a means of attracting new companies to our country - a means of attracting business that is inherently prejudiced against existing companies and amounts to the federal government picking and choosing winners and losers. It also provides an unheard-of incentive for US-based corporations operating overseas to bring home the more than $13 TRILLION in foreign-earned profits that now sit in foreign banks. Can you begin to imagine the impact such an infusion of funds would have on our economy? The jobs that would be created or returned to this country? Under the current system, as explained by former Michigan Governor Jennifer Granholm in response to a reader's question regarding Michigan's Film Tax Credit in the November 2, 2009, edition of Time Magazine, "You can't give tax credits to everybody, because somebody's gotta pay for them." By shifting the tax burden to consumption of both goods and services rather than income, we can incentivize all businesses, making it more likely that they will choose the US as their base of operations, which, in turn, will also increase the amount of spending that takes place as more Americans go back to work.
Fourth, the FairTax does away with the one thing that truly forces the middle class to shoulder the brunt of the tax burden under our current system -- loopholes. An individual with a good tax attorney or CPA is able to avoid the lion’s share of their tax obligation because of the myriad of loopholes that exist in today’s tax system - loopholes created BY the wealthy FOR the wealthy. Anyone who can afford to pay, which, by definition, excludes most middle and lower incomel earners, can shift their tax obligation to those who cannot afford such help. The argument has been made that such a shift is unfair and immoral, but the only system that truly addresses this inequity is the FairTax because of its complete lack of loopholes.
So to those who are convinced that our traditional tax system holds the answers, although the condition of our economy would seem to indicate otherwise, I would encourage you to take a moment to check out the data for yourself. $22 million have been invested in this research, and it is yours to study at http://www.fairtax.org.
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