I have been reading about the Fair Tax plan lately, and I think it has a lot to offer. Under the current taxation system, the average Joe citizen doesn’t even know how much tax he is paying. There are simply too many hidden taxes built into everything he buys. For example, when one buys a pizza, part of the cost of that pizza is Federal Excise tax on the tires which the pizza delivery van rolls on. Another portion of the cost of that pizza is the income tax the pizza parlor pays to the government. Since businesses pass on the cost of whatever taxes they are required to pay including income and property taxes, its the consumer who pays in the end.
With the Fair Tax plan, all that is replaced by a National Sales Tax, about 15% or so. This will be added on to everything a person would buy. However, since businesses would no longer have to pay all those hidden taxes, their expenses would decrease, and competition would ensure that their prices would decrease to match. Also, every citizen would receive a check from the government each month as a prebate for the Sales Tax for the purchases representing a basic subsistence level. In other words, people at the poor end of the spectrum would end up paying no Sales Tax.
But there may be a problem. Lets look at someone who is no longer working, and living on their life’s savings. The money in their savings accounts was already taxed. Now if they have to pay the Fair Tax on their purchases, they would be double taxed. Is that fair? Well, it all evens out if the prices of goods and services decrease because of the elimination of all the hidden taxes. So being in that category, I would not be any worse off than under the present system.
Another benefit would be the decreased need for all the IRS personnel who are presently required to administer our highly complex system. Presently, the IRS is contracting out debt collection to private companies because they do not have enough personnel to do their job. Under the Fair Tax, we would not have to file Federal Income Taxes.
Businesses would also benefit, as they would not need large tax accounting staff and legal counsel just for the purpose of avoiding income taxes. This means lower expenses and a more efficient operation. The Fair Tax would also make US good more competitive in the world market, leading to a bigger share of the world pie for the US. To me, that sounds like a good idea.
I suspect tax accountants, lawyers, and politicians will not like this plan. Accountants and lawyers make a lot of money from the current system, and politicians do not want you to know what your real tax burden is. But do we run the country for them, or do we run the country for the rest of us?
For more information about the Fair Tax Plan, visit www.fairtax.org.