Tax Reform --- The Fair Tax, A Wonderful Dream? (Part II)

Bonnie Alba

What if you were able to take home your whole paycheck, no withholdings except possibly for savings and 401k accounts? You’d probably say “No Way!” Yes! The Fair Tax proposal (H.R.25) is on the congressional table. Sound too good to be true?

In 180 pages, attorney and radio talk show host Neal Boortz and Congressman John Linder explain the whole Fair Tax Plan from beginning to end in their book, “The FairTax Book, Saying Goodbye to the Income Tax and the IRS.” Easy to understand with examples provided and much, much easier than the current IRS tax compliance system of upfront withholdings from our earnings.

The present IRS system with its multiple contradictions causes hardworking taxpayers to live with an endless nibble of fear while preparing their annual tax forms. The last thing any working American wants is to tangle with the IRS. Even tax preparers like H&R Block aren’t able to keep up with tax code changes, resulting in increasing errors on returns.

Okay, there has to be more to it. How would the federal government collect tax revenues from us? Simply it’s a consumption tax (which would be in the neighborhood of 20-30 percent) on all goods and services. Oh no! Don’t we pay enough taxes right now on everything? Won’t retail prices rise? I thought so too. So what’s the catch?

Example: Today you shop for a TV, find one for $500. The catch: Already embedded in that price is a 20 (plus or minus) percent tax collected for the retailer-manufacturer-company to pay the government. Big Business has the job of collecting (hidden) taxes from you to pay their taxes.

Under the Fair Tax system, the manufacturer would lower the price of the TV by that amount so the price is $400, but at the cash register, with the fair tax added, it would cost $500. We wouldn’t pay any more than now. This would vary of course. No longer would corporations have to collect hidden taxes for the government.

Surprised by the amount of tax included in today’s original price? We see these taxes and fees on communication and utility bills all the time and never wonder why we are paying them. It’s actually the company-businesses who are obligated but they just pass it on to the consumer. Our elected representatives in Congress know this.

The Fair Tax plan would affect all strata of our society, rich to poor. At the top end, the rich would pay the same tax as the rest of us. They will invest more in our economy which makes it better for the rest of us in new businesses and jobs. It also decreases the monstrous strangle-hold that the federal government has on all businesses. The Beltway special interests would disappear. Maybe those lawyers could move to Canada and fight for real and faster medical care for those dying while they’re waiting.

At the lower end, the working poor take home all their pay. And the government will provide a monthly “prebate” check to cover their “necessity” expenses if qualified acccording to income and size of family.

Mr. Boortz says we must do this “Cold Turkey.” But there are several issues which prevent the Fair Tax from becoming reality:

** Congress: They hate change, preferring “fingers in the dike” rather than reform. The powerful and burdensome IRS tax collection system is the result.

** States: All the states would have to be on the same page, so to speak, reforming their own systems to accommodate and adjust to the Fair Tax system.

** American taxpayers don’t like change either. But the Fair Tax should spark their interest to end one aspect of Big Government interference in our personal lives.

By now, you must have a zillion questions about what concerns you as a taxpaying individual. Read the book which besides being informative is entertaining with the little quirks Boortz throws at us.

The best thing about the Fair Tax is the IRS would disappear from the American landscape and April 15th would be a wonderful spring shower. No more fear, no more wasted time and expense.

One concern: Those congressional tax and spend bulls must be restrained by law from upping the sales tax to finance their spending sprees. Only then would the Fair Tax be the dream it appears to be.

Is this bold Fair Tax plan just a wonderful dream? You tell me.

[Next: Flat Tax and why it’s better for us --- for now.]

© 2005 Bonnie Alba
balba2@earthlink.net

Reference: Part I, “Tax Reform --- Not! Just More Tax-Raising Simplified Chaos” 10-20-05