Both my Father and older brother were Certified Public Accountants. Around the dinner table, the Internal Revenue Services was spoken of as the adversary. “Tax time” which used to mean a March 15 deadline was preceded by a period of long working hours. Over the years the tax laws became so arcane and dense so as to defy comprehension.
The income tax is probably the worst thing that ever happened to the United States in the last century because it was always punitive and regressive. It punishes saving. It deters economic growth through investment. It takes the wage earner’s money before he or she receives their paycheck.
There is nothing so powerful as an idea whose time has come and you can read all about it in Ken Hoagland’s “The Fair Tax Solution: Financial Justice for All Americans” ($19.95, Sentinel, Penguin Group USA). With notes and index, this book is a mere 151 pages and is small enough to fit into anyone’s pocket or purse. You will learn more about taxation in America from this little book than from several volumes of tax code.
Let me put the Fair Tax is perspective. In early March, The Washington Post reported that “President Obama’s proposed budget would add more than $9.7 trillion to the national debt over the next decade, congressional budget analysts said Friday.” As most people know by now, you can never trust any estimate of costs that the government puts forth unless you multiply it by a factor of two or three.
The U.S. is facing a financial Armageddon.
The projected deficit of $1.5 trillion “would force the Treasury to continue borrowing at prodigious rates, sending the national debt soaring to 90 percent of the economy by 2020.” Someone wants America to collapse and someone is doing everything in his power to ensure that happens.
Real limits on how much the government can borrow must be imposed. Limits on how much it can spend are needed. The claim that taxes only “soak the rich” is false because income tax laws are now destroying the middle class while most of the officially “poor” pay no taxes at all.
Hoagland is the Communications Director of Americans for Fair Taxation, the sponsoring organization for Fair Tax legislation. What he does not know about taxation is not worth knowing and what he does know he imparts with breathtaking simplicity and directness.
“Today we tax the very thing our economy needs to grow—income and that which produces income. We take money from savings, from returns on investment, and from what we are paid for our labor.”
The Fair Tax, which would replace only federal taxation, is based on what we individually consume. It is paid at the point of sale and it does not take earnings from one’s paycheck, nor punish you for having a savings account or for capital gains as the result of investing wisely. A Fair Tax says your money is your money.
The current tax system actually punishes corporations for being headquartered here. The U.S. levies the second highest (after Japan) corporate tax in the world. The result makes doing business in American far less competitive than in other nations. It forces corporations to collectively spend billions on compliance.
“According to the Tax Foundation, small businesses spend an astounding $724 in compliance costs for every $100 they pay in income tax.” Most people have to hire people to prepare their tax returns for them because of their complexity.
Enacted in 1912, over “almost one hundred years of congressional amendments, court decisions, and taxpayer/IRS disputes (the tax code) has swelled to more than 2.1 million words” and in fiscal year 2006 it totaled 16,845 pages.
When an earlier version of the income tax was proposed, it was repealed in 1872 and a later 1894 version was rejected by the Supreme Court as unconstitutional in 1895 because the income tax violated the Constitution’s prohibition against direct taxation (article 1, section 9). It took a Constitutional amendment, the sixteenth, ratified February 12, 1913, to permit it.
After that, Congress had an enormous source of revenue with which to swell the federal government.
“The cost of compliance, the hours and money spent on preparing tax forms, totaled close to $300 billion in 2008,” writes Hoagland. “That’s twice as much as the total of all the taxpayer stimulus checks mailed out in 2008.”
The result of the income tax has been “destructive, as politicians from both parties have taken us down a path of unsustainable spending.”
Despite what you will be told, the Fair Tax will collect the same amount of revenue as the income tax, but it will spread the burden more equitably and transparently.
It would literally eliminate any need for the Internal Revenue Service because it is a tax of 23% of what consumers spend “instead of an average of 30% of all the money they earn.”
No more gigantic, impenetrable tax code.
No more prying into the private transactions and earnings of citizens.
No more deductions for withholding and payroll taxes from your paycheck before you are paid.
No more punishment for saving or investing.
No more incentives for corporations to artificially keep salaries low or to move out of the nation to avoid harsh taxation.
Your earnings are your earnings. They do not belong to the federal or state government. With a Fair Tax, the more you earn, the more you keep, depending on how much you decide to spend.
That’s why it is called a Fair Tax and that is why the time has come to enact it.