FairTax Clarity

After volunteering an entire weekend with FairTax at the Seaside Balloon Festival in New Smyrna Beach, I have a renewed clarity on my support for FairTax, HR25.

FairTax is a national movement to abolish the Federal Income Tax. Rather than paying taxes on what we earn and invest, we will pay taxes on what we spend. Right now, only those who legally report their income pay income taxes. The more you make, the more money you have to find loopholes in our 70,000 page tax code. Our income tax incentivizes people to do business under the table, to invest overseas, and if they can afford it, to completely move their businesses to countries with more favorable tax codes.

Currently, we're taxed on income (through payroll and income taxes), investments, gifts and most insultingly, we're taxed if we have anything left when we die. Businesses must operate at a profit to say afloat, so when we raise taxes on businesses, they must pass it on to the consumer. That means we only get to keep some of our earnings and then we pay taxes for businesses when we spend that money!

FairTax, HR25, proposes to replace all those individual taxes with one transparent retail sales tax charged only on new goods and services at the final retail level. I'd like to clear up some common, yet valid, misconceptions I heard over the weekend about FairTax:

• FairTax is regressive, the poor will pay more than the rich. FALSE! What makes FairTax unique is the monthly pre-bate. Written into the bill is a rebate to every American household on taxes spent up to the poverty level. Rather than basing it on income, it's based on the Federal Poverty Level and household size. No American will pay Federal Taxes until they spend above the poverty level. If one spends $50,000 in a year, their tax rate is 13.6%. The more you spend, the more you pay in taxes.
• FairTax will promote a black market. Right now, it takes only one person to cheat on their tax return form. Under the FairTax, it takes two people - the person selling the goods and the person buying them. Most retailers will not jeopardize their businesses to save someone the cost of federal taxes. In addition, our trillion dollar black market is finally taxed - do you know a drug dealer or prostitute who legally reports their income? Certainly not! They do, however, legally purchase goods and services in this country.
• How will we fund our roads or social security if you want to end federal taxes? FairTax REPLACES the Federal Income Tax. FairTax has nothing to do with budgeting or spending. FairTax defunds the IRS and eliminates our 70,000 page tax code. Rather than collecting taxes from those who legally report their income, FairTax collects revenue from everyone in America. Americans keep their entire paychecks while everyone in America pays taxes.
• How, in economic times like these, can we count on spending to fund our government? Historically, spending is more consistent than income. Take your unemployed neighbor, for instance. They no longer have a job with income, but they must spend about the same amount of money to merely exist. (Remember, they'll also receive the pre-bate, untaxing all spending up to the poverty level.) And, that unemployed friend may take money out of their 401k or other retirement plan to pay their bills without penalization from our government.
• What about the home mortgage deduction? Well, if you get to keep all your income, there's nothing to deduct! We only have deductions because the government keeps a portion of our income before it hits the bank accounts. Receiving your entire paycheck means no more pandering to get your money back.
• Why not a flat tax? The more you make, the more you pay to the government! Flat tax still depends on people honestly reporting their income to the Federal Government. The flat tax does not repeal the payroll tax, America's most regressive tax of all, which deducts 7.65% from employees paychecks and charges the employer 7.65% for the "privilege" of offering employment. It also keeps the IRS in tact and similarly encourages businesses and wealthy individuals to conduct business overseas.

The FairTax Act, HR25, encourages economic growth and estimates a 10% in our GDP in the first year of implementation. Because America will be a tax haven, corporations throughout the world will flock to our shores, creating jobs and wealth. Currently, American products do not compete on a world-stage because our income and payroll taxes are embedded in every item produced in America. FairTax removes embedded taxes, allowing for fair competition of American products. It also adds the same federal tax to any imported goods sold in America.

No longer will we punish productivity; instead, we will encourage job creation and economic growth. No longer will law-abiding citizens be punished for reporting their income to the IRS. Every American keeps their entire paycheck; everyone in America pays federal taxes.