Saturday, September 10, 2005

The FairTax Updated

(My thanks to Outside The Beltway for their open post!)

I've read "The FairTax Book" by Neal Boortz and Congressman John Linder and I am recommending it in the highest possible terms to everyone. It's not a huge book (187 pages, counting the index) and it's written in an easygoing almost conversational style. It's a fast read and that's saying something when the topic is prospective tax law.

So, what is the FairTax? Rather than try to talk about it myself, I'm going to direct you to the source. Well, one of them, anyway. I still recommend that book, big time. But for details on what this is all about, look no further than the site for Americans for Fair Tax and their FAQs on the topic. Get educated on the matter before you decide.

In brief, the FairTax is a national consumption tax that replaces the federal income tax and payroll taxes. The mechanics of how that comes about and what it entails is on the web site but I'll tell you what has convinced me that we need to go this route. Funding the federal government - and most specifically Medicare and Social Security - by taxing the income of working Americans to provide benefits for non-working Americans is a system with a built-in design flaw. As the ratio of workers to non-workers lowers, the funding drops. What was a surplus becomes a status quo parity and then a deficit. When the funds accumulated during surplus years runs out, the system can no longer provide enough funding to handle the payments. This is exactly the situation we have with Social Security (due to become bankrupt in 2041) and, even worse, with Medicare (due to become bankrupt in 2020). The only way to provide the required funding is to increase the burden on working Americans, either by taxing more of their income or raising the tax rate or both. The system relies completely on having a lot of working Americans for each non-working one. When that variable fails to live up to the requirement, the system collapses.

A consumption tax, on the other hand, taxes every American according to their consumption as opposed to their production. Again, I urge you to go to the site and read up on it. Oh, and by the way: this is already a bill before Congress. It was last year, too, but for some reason we never heard about it from our media. Again. Well, you don't have to be reliant on that avenue of info any more, so go read up on it. Decide for yourself.

Update: After posting this I started poking around the AFT site and found a quick "Tagline" description of AFT and the FairTax for use in literature and whatnot. I figured I'd just include it here for your quick review.

::::::::What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll taxes with an integrated approach including a progressive national retail sales tax, a rebate to ensure no American pays federal taxes up to the poverty level, dollar-for-dollar revenue neutrality, and the repeal of the 16th Amendment. This non-partisan legislation (HR 25/S 25) abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them all with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities. The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. So it is also cost neutral – the final cost for goods and services changes little under the FairTax. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

What is Americans For Fair Taxation (FairTax.org)?
FairTax.org is a non-profit, non-partisan, grassroots organization dedicated to replacing the current tax system. The organization has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts. For more information visit the web page: www.fairtax.org or call 1-800-FAIRTAX.
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