Tuesday, August 03, 2004

Make April 15th just another day

I just wanted to take a minute and talk about something that could mean everything to our country. It's the tax system. Currently the tax system is an huge behemoth weighing in at 58,000 + pages and growing every year. It's main purpose is to penalize people for making money. The more money we make, the more we pay in taxes.

There is an alternative tax structure that's starting to make gains in this country. It's called the Fair Tax. It can be read about from the organization that developed it at http://www.fairtax.org. It's really easy to understand. Here it is in a nutshell.

The fair tax would scrap all federal income taxes including social security and Medicare and replace it with a retail sales tax. Only final goods would be taxed. No one would have to fill out tax forms at the beginning of the year. No one would have money withheld from their paychecks and sent to the federal government. The tax rate would be about 23%. Again, this is only on retail goods so wholesale and business to business goods wouldn't be taxed until final consumption and used items would not be taxed. The tax would be collected through the existing system in almost all states of collecting sales taxes and a fee would be paid to the states for the collection of the tax for the federal government.

To make the tax progressive, the first portion of what each family spends, up to the poverty line, would not be taxed. For example, the poverty line for a family of four is about $25,000. The taxes that would be paid on that $25,000 would be paid to each family in the form of a monthly check. So 23% of $25,000 is $5,750. So almost $480 check will be sent to a family of four at the beginning of the month in what is called a "prebate" because it is sent before the money is sent. Everyone will get this prebate whether you are the poorest or the richest. If you actually spend less than $25,000 per year, you will in fact receive more money than you pay in the sales tax.

One of the biggest benefits of the fair tax is that the cost of producing products here in the United States will go down because of all of the taxes companies pay that are embedded into the price of the products. Our products will be sold on a level playing field with products that are imported from other countries because the exact same taxes will be charged with the sale of an imported product as a domestic product and our exports will be lower in price in other countries, especially in Europe, where income taxes are still being used.

By taxing what we spend, instead of what we make, we're encouraged to make more money and save it for the future and invest it to create more income without penalty.

We will also benefit by abolishing the IRS. The cost of collecting taxes will decrease by 90%. The cost to taxpayers for compliance to the tax code (ie tax lawyers and accountants) will reduce to almost nothing. It will reduce the number of lobbyists in Washington DC by more than half. (More than half the lobbyists are lobbying for more tax loopholes.) The number of entities to collect taxes from will go from 200 million to about 14 million. For most people, audits will become a thing of the past and it will make April 15th just another day to millions of Americans.

In 2003, Senate and House bills were introduced to abolish the current tax code and adopt the fair tax. The Drudge Report (http://www.drudgereport.com/rnc.htm) reported that in a second Bush term, this will become a main focus of the Republican party with support from many Democrats. Bush has said that he would sign such a bill in his second term.

If for no other reason, we should reelect George Bush to get this tax reform passed and to grow our economy like it has never grown before.