Rants, Raves, & Random Thoughts

Shameless self-promotion of my writing skills or lack there of.

Thursday, February 28, 2008

Fair Tax

I want to take a minute to discuss The Fair Tax movement. Have any of you heard about this?


I first caught wind of it around this time last year. It seemed like a grand idea, but I didn’t put too much stock in its chances of ever becoming a reality. There are too many people in this country that make copious amounts of money, helping others avoid paying all of the taxes they owe.


What is Fair Tax? Here is the description straight from their website:


The Fair Tax 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.


The FairTax:


• Enables workers to keep their entire paychecks
• Enables retirees to keep their entire pensions
• Refunds in advance the tax on purchases of basic necessities
• Allows American products to compete fairly
• Brings transparency and accountability to tax policy
• Ensures Social Security and Medicare funding
• Closes all loopholes and brings fairness to taxation
• Abolishes the IRS


If it sounded like a great idea last year, this year it sounds like the best idea ever. You see, I’ve officially been hammered by the tax laws for 2007. Between bonuses, additional income from writing and a few other activities (stocks and such) and my wife’s (who is a chemist and also happens to be a manager) income, we ran into a bit of a problem. Before I go on, I feel the need to tell you that we both file single and 0, to avoid having to pay in. This theory has worked for us in the past, but last year it failed us. By the time it was all said and done, we owe the government and additional $30,000. Yep, that is with four zeroes. Turns out that our combined household income was just enough to put us in a new tax bracket.


With Fair Tax, surprises like this would be completely eliminated. Every single penny I earn will come directly to me. If I buy something, I pay taxes. If I want to save for the future, I’m not taxed for thinking ahead. Not only that, but everyone will pay taxes, not just a select few, tourists, illegal immigrants, even billionaires, anyone who makes a purchase in our great country will be doing their part.


Those who spend more, will pay more. That means, in essence the wealthy will carry the brunt of the burden and the moderate to low income families will continue to spend as they are, but with the benefit of having their entire paycheck.


One of the cons with this movement, that instantly came to mind was that all of our consumables would go up by 23%. That’s not actually the case. The businesses that offer us the consumables are taxed heavily and they pass that cost on to us in the price of the product. Without the upfront tax, the overall cost of the product will go down so that the increased sales tax will appear negligible. Again from the website:


Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.


This really sounds like the way to go to me, but maybe I’m overlooking some detail. What are you thoughts on it?

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2 Comments:

At 9:23 AM, Blogger Breazy said...

James I agree with you, it sounds like a fairer way to do things. You know that my husband owns his own hardwood flooring business, well my husband is very successful in what he does, in other words he makes awesome money but in Feb. of 2006 when we filed taxes we had to pay a huge amount as well, I wasn't happy nor was my husband but it is the IRS you know. I would love to see the Fair Tax go into effect.

Also I am reading The Dance, thus far I am thoroughly enjoying it and I have already noticed a couple of changes and I like them.

Will get back to you as I read more.

Have a great day!

 
At 9:28 AM, Blogger James Goodman-Horror Writer said...

Thanks, Breazy. I'm glad you are enjoying it. :D

As for the taxes, it just blows to get hit with a huge tax bill even after you contributed so much throughout the year. We tallied it up and with the additional 30K we wound up only getting to keep half of the money we earned last year. The rest went to FICA, IRS and other assorted taxes. It just plain sucks. It's almost enough to make you not want to excel in your field so you can stay in the lower tax brackets. Almost... :D

 

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