I support the FairTax movement.
Now, let me focus on that for a moment. By 'support', I mean that, when feasible within my budget, I provide monetary donations to them. I do this due to my belief that they are the strongest lobbying entity in the National Sales Tax field. Beyond that, I do not endorse them, aside from sending interested parties to their website to learn more.
The Fair Tax model is not entirely correct, in my opinion. Their numbers are off and their economic theories are not entirely accurate. However, they are gaining a slow momentum and bringing attention to the idea of what I do support.
A National Sales Tax in lieu of income taxes.
There are many who oppose the idea in any shape or form... and I'll grant them their reasonable concerns, as the imposition of a NST is a drastic change to the system.
I'm still not perfectly educated on the issues involving it, but I'll try to provide my reasons in support of the tax.
1. Under a NST, certain groups that were previously untaxable by income standards (i.e. drug rings, illegal pornography rings, those involved in prostitution, black marketeers, etc.) would now be taxed on purchases made with their less than legitimate funds. Personally, I like the idea of being able to 'tax' incomes that are otherwise out of the normal tax loop. We would also catch those individuals who are being paid 'under the table', preventing them from circumnavigating the system.
2. While it may seem a bit odd, we would also pull tax dollars from international tourists. I haven't looked up the numbers for how many visitors we receive annually, but I would imagine it's a sizeable amount.
3. A NST would eliminate the 'matching dollars' system under which our employers currently operate. That money saved could be used for a number of beneficial actions, ranging from offering higer wages/salaries, providing more affordable health insurance options, more rapid expansion of businesses, etc. Savings could also be handed down to the consumer, which may help keep prices relatively the same compared to the additional funds individuals would have in their pockets. Prices might be higher than they are now, but we would, effectively, have more money to spend.
4. With a NST, we could reduce the size of government organizations involved in the collection and review of taxes. Yes, that means some people will lose their jobs, but with the potential for a stronger economy, it would more of a shift from public to private sector for them. The money no longer being spent on these organizations would help reduce our annual budget requirements, allowing us to put funds where they're needed.
A simple NST, however, would have to be carefully considered. While our tax code is a bloated mess, there are a number of statutes that provide some tax relief for a myriad of reasons (property ownership, expenses on dependents, etc.). There would need to be a similar system designed, ableit more simplified than the current code. These reliefs could be applied towards the prebates individuals would receive.
The prebates, themselves, are another concern. The system for prebates needs extensive work. Under our current system, as Chris Muse pointed out in a comment on my post about taxation, almost half of our citizens wind up not actually paying any taxes. There are many of those who receive more in refunds than they pay out over the course of a year. The prebate system needs to be designed to prevent this imbalance.
I would suggest something similar to our W-4's we currently use. Individuals provide their exemptions and prebate checks would be based around the review of these forms. However, there should be a percentage cap on 'taxes' refunded. If we can provide a system where no one is either 'zeroed' out by their prebate or makes a profit on it, a system where everyone winds up on the 'plus' side of taxes to the government, we will be better off than we are now.
The only issue for which I cannot discern a solution is for those who will have already spent the majority of their employed lives paying under the current tax system. Senior citizens would be the hardest hit, excepting those with exceptional pensions or retirement investments. It doesn't seem entirely fair to have them paying equally into a National Tax when they are no longer employed. Perhaps it would be an exemption for them... allowing those over the 'social security' age prebates that would produce a 'zero sum'.
However, I wouldn't hold the same true for the welfare system. Welfare users would still be subject to the sales tax, which would effectively mean their expenditures would actually help offset the cost of their system use.
The current ideas out there for a NST aren't perfect; neither is my concept, for that matter. However, I believe it is time to repair and readjust our tax system with the hopes of re-establishing ourselves as a strong economy and nation.
Hello world!
5 years ago
2 comments:
You have a fairly good understanding of the FairTax but your thoughts on the Prebate are missing one important concept.
The prebate is given to people for being legal citizens of the United States. It isn't given for being poor. It treats all Americans equally, no special interests.
This becomes the only incentive in the country that encourages Legal Citizenship. An illegal Alien will pay the tax but not get the prebate that protects him when he isn't making much money.
The current incentives in the tax system are irrelevant under the FairTax. The tax benefits of home ownership don't matter when you get all your money in the first place. Buy a used house and you won't pay any additional Fairtax.
If you are retired you are still going to pay income taxes when you get your retirement money. You are also paying the imbeded costs. Under the FairTax you get the prebate and you get the benefit of any cost savings, just like anyone else. Seniors are better off under the FairTax than under the current system.
You have to breakout of the Income Tax mindset to get your head around it. Most everything we think of as a benefit under the current system is actually not doing what it proposes to do. Every legal citizen is better off under the FairTax than they are under the Income Tax. Those that aren't paying any taxes now will be worse off but only because they haven't been contributing as they should.
Lobbyists and the people who make money off of the current system will have to find new jobs but America will be better off.
I will agree that while I find a NST appealing, I do have some difficulty removing myself from the aspects of taxation to which I've grown accustomed and, as such, do tend to apply some of those ideas towards the NST.
As a clarification on the prebates, I was more concerned about someone receiving more in their prebate than they may have potentially spent on the sales tax. I know everyone would get the prebate, but comparing an individual who paid $8000 in taxes on a house is not going to recoupe that amount, wheras an individual making less money and making careful purchases might actually profit from the check.
What I'd like to see is a system that prevents us from paying someone more in prebates than they've contributed to the system. That's part of the problem with our current tax code... there are too many people who are refunded more than they've actually provided in income tax, Social Security and Medicaid combined. Perhaps I haven't read the applicable Fair Tax documentation, but, as of yet, I have not seen anything that might solve this issue.
Don't get me wrong... I fall into the category of people who winds up ahead of what I've paid into the system. However, I don't feel it's logical for someone else's tax dollars to be paying me for being 'poor'. We would have a much larger Federal budget if we would just set a percentage cap on refunds based on the amount contributed by the individual.
And, honestly, I'm not certain if that would be possible with a National Sales Tax.
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