Posted by: As I See It by Arnie | December 20, 2006

A Fair Tax. Can there be such a thing?

December 19, 2006

Santa Forced to Outsource!

North Pole – Kristofer Kringle, aka “Santa,” the CEO of the world’s largest toy distributor Santa Clause, Inc., announced Monday that Christmas has officially been canceled this year. “He just couldn’t compete this Christmas,” The Wall Street Journal “reported lower than average July numbers and the layoff of over 25,000 union elves after last year’s peak season as evidence of Santa’s decline. Advisors close to Santa have said that a main culprit for the decision was the federal tax system, which was killing his competitiveness and driving up consumer prices. Economists have shown that the current federal tax code places as high as a 22 percent price disadvantage on American products over their foreign competitors. This is because foreign products bear no federal tax burden when imported here, while exported American products bear both the costs of our federal taxes and foreign taxation.”

I’ve desired to write about this new tax plan and post here for some time, and now, this appears to be the time. It’s not really new. Many of you real conservatives have already heard about it. It’s been tossed about. It’s been researched. It’s been documented. It’s been demonized. It’s been written about in a hot seller at Amazon. The nay Sayers has attacked it. It’s been held up to scrutiny by the best and the brightest, the ‘experts’ at keeping taxes flowing. It’s been hailed as the greatest new tax idea of all time. It’s even been introduced as a bill in congress.

The Fair Tax Plan.

Replaces the Income tax. You get ALL of your paycheck, with no federal tax deductions paid by you, and your employer. You figure how much more you would take home by looking at your latest paycheck and add back in the amount of federal tax, social security tax that was deducted from your check. You take it home for you to decide how to spend, or save it. Your employer is paying an additional 7.65% of your earnings as their share in the income tax. In many cases you would probably get that as a raise in take home also, as the employer will not have to pay it to the government, he could give it to you. Now, how much would you take home?

Eliminates the corporate income taxes and costs of compliance hidden in retail and wholesale prices. Did you know that hidden income taxes and the cost of complying with them currently make up 20 percent or more percent of all retail prices? You do know that only the consumer and worker pays all the taxes in this country, right? Corporations incorporate all the taxes that they pay into the costs of goods and services they charge to customers, either on the wholesale or retail level. It’s a hidden price component. Do you think that when company A lowers their price 20%, that their competition, company B and C would not lower their price? Word spreads quickly in this digital age. Competition would force prices to drop an estimated 20 to 25%.

No more yearly tax returns to file. The huge federal bureaucracy called the IRS is virtually eliminated. No returns to send in. And if you are self-employed, no need to send in those quarterly checks and tax estimates to the IRS. No fear of your return coming back with an audit notice. There would be no need to hire someone to figure out for you how to pay fewer taxes. Even the IRS admits to a 25% non-compliance to tax codes, which in a nutshell, means that many who should be paying are not paying their share. Who makes up that difference? You and me with increased rates to cover the losses.

More work for Americans here in America. The FairTax would put “U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries’ value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match”. All goods imported would be subject to the same tax rates as American goods and services. One rate for all. The advantage to American made products is that of other countries having a value added tax before being exported to the US. Thus, American made products would see a resurgence, and more jobs for Americans.

How would the feds get their taxes to support the government? I’m glad you asked that question, but first, let me tell about a Prebate check you would get each and every month.

You would get a monthly prebate “All valid Social Security cardholders who are U.S. residents receive a monthly rebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The rebate is paid in advance, in equal installments each month. The size of the rebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc.”

I’m married with no children: the rebate would be $376. A family of 4 would get $506. Alaska and Hawaii have different rates. Say that my wife and myself spend on average $250 week on food and dining out, a big expense because it’s what retired people do, right? For the month we would pay $230 in sales taxes, leaving $146 of the prebate to cover the taxes for other retail purchases. Sounds about even Steven. More than likely, I’d be ahead of the game financially.

Now, here’s a part that I specially like. Notice the statement above “valid Social Security cardholders, US residents”. That means the illegal aliens would NOT get a prebate check, and when they went to the store to buy things, then they would be contributing to our tax base like everyone else, only without a prebate to help pay for the basic necessities of life. That’s a gotcha.

And now to answer your question. A national sales tax on all new goods and services. All new goods and services would be subject to a 23% sales tax colleted at the retail level. Collected only once. Used goods are not subject to the tax. Corporations buying materials from another corporation for the production of products do not pay the tax. Only consumers pay the tax at the time of sale. Everybody likes to pick on the very rich and their purchases of very expensive luxury items. Well, they could not get out of this 23% sales tax on that $2 million yacht. Taxes = $460,000 collected at the time of sale. It’s a progressive tax meaning the more you buy the more taxes you pay. If you only bought used clothing, you pay no taxes on those purchases. When those filthy rich buy those fancy imported cars at $125,000, a sales tax of $28,750 is collected then and there. The less you buy at retail, the less tax you pay. Your choice.

Savings are not taxed.

If you’re one of those accountants or lawyers specializing in tax compliance for corporations, you may have to find another job.

“The FairTax Plan is a nonpartisan national grassroots campaign to replace the federal income tax system with a progressive national retail sales tax. It provides a “prebate” to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement and, through companion legislation, repeal of the 16th Amendment.”

Check it out for yourself. Fair Tax Web Site National Retail Sales Tax Alliance

A thumbnail sketch

It’s As I See It Now.


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