The Fair Tax
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The old adage of “If it ain’t broke, don’t fix it” is timeless advice. The reverse of that advice also holds true, that if something is broken, it should be fixed. And if what is broken has proven to be unfixable, it should then be replaced.
The Sixteenth Amendment to the U.S. Constitution states: “Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” The amendment was passed in 1909 and was ratified in 1913.
The power to collect federal taxes and to administer the Internal Revenue Code fell to the Bureau of Internal Revenue, an agency of the Department of the Treasury that was later renamed the Internal Revenue Service (IRS). There have been numerous legal battles fought regarding the 16th Amendment, but in the end, the federal government has always found that it has the power to take whatever they want, if they go through the proper public processes in order to maintain the air of propriety.
Today, there is hardly a subject more debated than taxation. As the narrative goes, liberals wish to raise taxes to pay for their social welfare programs, while conservatives would rather cut taxes in order to benefit the business owners who create jobs. In reality, both parties will regularly and bipartisanly vote to increase your tax burden, adding to our current U.S. Tax Code, to become absolutely unreadable at more than 75,000 pages long.
The “FairTax Act of 2023” is probably the single best solution to fix our irretrievably broken system of taxation. The Fair Tax was recently reintroduced into the House of Representatives earlier this year by Congressman “Buddy” Carter of Georgia. Carter took up the mantle of submitting this bill to Congress back in 2021, where it has been submitted every year since the original “FairTax” that was crafted by Georgia Congressman John Linder was first introduced as legislation in 1999.
To help sell the idea, Congressman Linder paired with talk radio host Neal Boortz to co-author “The FairTax Book” in 2005. They then followed with a second book in 2008 titled “FairTax: The Truth: Answering the Critics” to, well, answer their critics. Both books are available through Amazon or your favorite bookstore.
In essence the FairTax Act would replace ALL other current forms of federal taxation, eliminating the Internal Revenue Service (IRS) and all other federal income taxes, including the alternative minimum tax (AMT), payroll taxes (including Social Security and Medicare taxes), corporate taxes, capital gains taxes, gift taxes, and inheritance taxes, and replace them with a universally applied sales tax on consumer goods and services of 23%.
It is because the Fair Tax will eliminate the power that Congress has to manipulate the current tax code to their benefit, that it does not yet have broad support by either party. In order for the Fair Tax to become law, the bill will need to be included in a final version of tax legislation from either the House Committee on Ways and Means or the Senate Finance Committee, then obtain support from the Joint Committee on Taxation, and finally pass both the House and the Senate.
Should it ever be passed by the Senate and into law requiring the signature of the president, Joe Biden has already stated that he will veto the bill should it reach his desk.
What is it about the Fair Tax that so many politicians are opposed to? For starters, it will eliminate all possible tax loopholes that our Congress regularly crafts and adopts into our current 75,000-page nightmare in order to benefit themselves and their financial supporters. It will eliminate the need for lobbyists, as there will no longer be an income tax to seek exemptions from.
With zero federal taxes being seized beforehand from their paycheck, every working citizen will get to keep 100% of their income. If someone earns $50,000 per year (the median salary for Coosa County), except for what our state may deduct, that person will take home the full regular amount of every paycheck. No federal income tax. No Social Security tax. No Medicare tax.
The people will gain full control of their money, leaving each to invest however they may decide is best for their circumstances. The collection of taxes will be moved to a one-time collection of a sales tax on all goods and services. Once the tax has been paid, an item cannot be taxed again if it is resold.
The proposed rate for this national sales tax is 23%, and it would fall to the states to administer and collect the tax, the same as their statewide sales taxes, and then remit those sales taxes to the federal treasury.
Some have argued that the 23% proposed would in reality be more akin to 30%. The difference in calculating is merely semantics. The sales tax rate, as defined in the legislation, is calculated similar to income taxes as a percentage of the total payment including the tax ($23 of every $100 spent in total).
If the bill instead specified that it be calculated like a traditional sales tax, it would then be equivalent to the quoted 30% ($23 on top of every $77 spent = $100 total). The Institute on Taxation and Economic Policy has published estimates that the rate would have to be even higher, from between 45% to 53%, to raise as much as the income taxes, payroll tax, estate tax, etc. as is currently collected.
If true, what the Institute on Taxation and Economic Policy is stating is that we are ALREADY taxed from between 45% to 53% at the federal level and are unaware of that total because of how the taxes are collected.
The brilliant part of the Fair Tax is that when the amount paid in taxes is on the receipt of every new item purchased, people will see exactly what they are paying to Uncle Sam. Also, because the Fair Tax is a sales tax, the rich, who spend more, will pay more in taxes, including those who normally evade taxation, like drug dealers or illegal immigrants, and the poorer will pay less in taxes.
Under the FairTax, family households of lawful residents would be eligible to receive a “Family Consumption Allowance” (FCA) based on their family size (regardless of income) that is equal to the estimated total FairTax paid on poverty level spending. The FCA is a monthly tax “prebate” (as it would be paid in advance) and regularly adjusted for inflation. The prebate will cover the associated taxes for household necessities when those taxes are collected at the sales register, and it allows anyone who lives below poverty level to live tax-free.
Unfortunately the Fair Tax is only a proposal to replace all federal taxes with one single sales tax. Each state will be left to observe the effects of the consolidation at the federal level and then decide for themselves whether to continue with their old-fashioned systems for collecting tax revenue, or to adopt something newer, simpler and more progressive.
Having read “The FairTax Book” I contend that anyone who is against adopting The Fair Tax has not read the book and is simply parroting what someone else may have told them to say. It is my belief that if you take the time to read the book, that you, too, will come to the conclusion that eliminating the old tax code, and thereby eliminating the need for and the power of lobbyists, eliminating the IRS, and making April 15 just another day on the calendar, is the best option we have for the continued future of our nation.