The FairTax Book- Saying Goodbye to the Income Tax and the IRS Description:

The FairTax Book: Saying Goodbye to the Income Tax and the IRS review:
1 stars (The Cato Institute Objects to the national ales tax idea) - No doubt HR 25 has been studied by the best of minds; the Cato Institute is a non-profit public policy research foundation (think tank) headquartered in Washington, D.C.



Here are four potent objections it lists to the national sales tax:



Objection 1. The sales tax is regressive.



The rebate feature of the national sales tax makes this proposal nonregressive. Remember, a family of four would pay no tax on its first $20,000 of purchases each year. This is the equivalent of a zero bracket under the income tax. It is similar to the Armey personal deduction--though not as generous.



There are various ways of providing this rebate. Assuming that the sales tax were set at 18 percent, a family of four would be entitled to a rebate of $3,600 ($20,000 x 18 percent) for the year. The government could send a quarterly rebate check of $900 to every family of four; a $450 check to every family of two; and so on.



Another possibility would be to provide every family with an annual "smart card" that would have a sales tax credit based on family size. A married couple with no kids would receive a $10,000 credit on its card. Each time the couple made a purchase, the smart card would deduct that amount until the card's $10,000 credit was used up. After the first $10,000 of purchases, the family would begin to pay the sales tax.



So it dead wrong to argue that a sales tax is inherently regressive.



Objection 2: A sales tax of 18 percent would entail large- scale evasion.



A national sales tax of 18 percent, when added to the existing states sales taxes, would bring the total sales tax to between 20 and 25 percent.



Critics are right when they argue that a sales tax this high would encourage evasion. But compared to what? Evasion is already a huge problem with the income tax. An estimated $150 billion of income tax goes uncollected each year--according to the IRS's own calculations. Moreover, states report that the their sales taxes are generally easier to collect than their income taxes, because there are so fewer points of collection.



I believe that much of the evasion that goes on with our tax system is a result of the correctly perceived unfairness of the system. Once we move to a national sales tax that is perceived as fair, simple and just, compliance rates will climb substantially. This is also true of the Armey flat tax as well.



Objection 3: the sales tax may not be a replacement, but rather an add-on to the current income tax.



A very legitimate concern voiced by many conservatives is the danger that America will end up with both a sales tax and an income tax. This has been the experience with the consumption tax VATs in Europe. For this reason, some critics argue that the sales tax is only acceptable if the 16th Amendment to the Constitution authorizing a federal income tax were repealed. That would certainly be highly desirable, but is not necessary. To protect against the reintroduction of the income tax, I would insist on a supermajority tax raising requirement.



Objection 4: The national sales tax has been a political and economic disaster in Europe and Canada.



VATs have had highly negative consequences in Europe. They have not raised savings rates, they have not reduced income tax burdens, and they have been an engine of growth of government. For these reasons, I strongly oppose a value-added tax. But no European nation has implemented a national sales tax as a complete replacement for the income tax. This is the critical difference between our proposal and what has occurred in Europe and Canada.


5 stars (Bring Back the MONEY) - This is an incredible information tool on how bad the money waste, under the title of "looking out for the common man" has become. It is a fact, tendered by the gathering of information in this book, that there is more than enough money in the US to fund the social programs we ought to fund, to help the ACTUAL poor, downtrodden, and disenfranchised, WITHOUT stealing from those who generate the money flow.

GREAT BOOK. GREAT IDEA whose time has come.
5 stars (A proposal to remove inefficiencies and increase competitiveness and fairness in our federal tax law) - While there are several books currently available proposing tax reform, they all agree on one thing: our current federal tax system is a broken monstrosity. It is so long and complex that no one can say that any given computation of even a moderately complex tax liability is correct because no two experts can agree on how it should be done. Worse, the law is riddled with one-off exceptions for any business with political connections. Not only do these unique laws provide distortions in marketplace competition, they underscore the kind of political dealing that undermines the faith of so many in our government's integrity. These special favors for political friends encourage others to engage in other kinds of political corruption and the rot simply grows. Add to this the way the IRS invades and bullies citizens, and there is all the more reason to junk the current system.



The tax law is also riddled with attempts at social engineering. A great deal of the money the federal government takes in is used to shape behavior. The hammer of withholding federal money if you fail to adopt one of their policies has changed society over the past several decades and often not for the better. It makes our economy less efficient and encourages people to game the system and end up ever more dependent on the government larder.



This book proposes doing away with all income taxes and all other federal payroll withholding and replacing it with a tax on all retail purchases of new goods and services. They rightly point out that our current prices are full of hidden taxes and inefficiencies (for example, the cost of computing these taxes) that make us less competitive at home and especially abroad. They believe that removing theses inefficiencies will roughly offset their tax. So, when you realize that you get your same paycheck with no withholding, it is pretty much a free lunch. Better yet, our exported goods will not be charged this tax, so they are much more competitive because the current built-in taxes and their associated costs are removed.



The social coercion aspects of our current taxes are also removed, as are its disincentives for saving your money. The authors believe that their Fair Tax will encourage the formation of savings, make Social Security and Medicare safe for future generations, and usher in a new era of prosperity. Sounds great! You have to decide for yourself if you buy into their program. Your buying in is essential because only a popular campaign pushing for the implementation of this revolutionary tax program will make it happen. Every current lobbying group, tax accounting firm (and professional organization), and Congressman will oppose it for their own selfish reasons. It simply is not in their interest to give up their power over you or their clients. So, this will never happen on its own.



It is a short book and answers most of the questions you will have about this program. However, I am still not sure how they will go about repealing the amendment authorizing the income tax. Until they do that, I am unsure how we would avoid ending up with Congress implementing both this tax AND an income tax although the authors state that abolishing the income tax once and for all is part of this program. The hunger in Congress for our money knows no limit. Your representatives are so inebriated by their power they actually believe that you keeping more of your own money is a tax expense on their part!



Another important issue that is not seriously handled in the book is how the market for wages would readjust if there were no withholding. The authors assume you would keep every penny and maybe even get that portion the employer now contributes to Social Security on your behalf (in itself an illusion - it is your pay). I am not so sure. Yes, your current salary was set in a competitive market, but if everyone is now so much better off because of efficiencies, wouldn't certain new hires be willing to work for less? After all, the stock price of the last share sold sets the price for the valuation of all shares (at least for an instant). So, it may be that there would be salary efficiencies gained as well and everyone will end up earning somewhat less over time and the FairTax would not be the free lunch the author's claim. Certainly, this is likely to be a huge wedge its critics will use against it.



This is an interesting book that deserves to be widely read and its merits debated along with the other proposals currently being discussed. However, don't be fooled. Those in power will try to kill all of them by pitting their supports against each other and confusing the public. Their real goal is to keep things under their control and reform is not something they want. Just look at how none of them are moving to remove or reform the Alternative Minimum Tax that affects millions of relatively average taxpayers rather than the few millionaires it was originally created for.



My own belief is that tax reform that removes power from Washington, is least susceptible to manipulation, and makes they payment of the tax most explicit to the payer is the best. However, the real problem is the spending level of the federal government. Arguing about taxes is simply arguing over how the bill should be split after the banquet. The important work is making sure how much the banquet is going to cost before it is held.