Clearing up perceptions of the Fairtax
This letter is in response to Lester Thornton's article "Pay Your Tax! Who? Me?" of May 14.
First, no responsible person would advocate that we should not pay taxes. My article was simply to present a system of taxation that is, by its nature, simpler, more efficient and yes, fairer.
In reference to a federal tax system titled the Fairtax, a national retail sales tax, I use the word fair, in the sense that all taxpayers are treated exactly the same.
In a sense, the idea of fairness is a childish holdover. Who has not heard a child say, "But that's not fair!" and yet the concept persists into adulthood, probably because no one likes to think that someone is being given an unwarranted preference over himself.
I admit the definition of fairness in relation to taxes depends on your political philosophy. Liberals believe those who have wealth should pay not just more taxes, but a greater proportion of their income in taxes, as they do now, so the government can redistribute that money to low-income people.
I believe that as it concerns taxes, fairness should mean that everyone is treated exactly the same, which the Fairtax does.
Mr. Thornton asks, "How could there be a tax that is fair to the person who works for the minimum wage and to the person who receives $1 million in income?"
The Fairtax is fair because it treats everyone the same, the very essence of fairness. In addition, the Fairtax is the only federal tax that completely untaxes the poor.
The FICA tax is the most regressive of all. Every earner must pay the FICA tax, no matter how little they earn. Under the Fairtax, FICA taxes are eliminated and the poor are completely untaxed.
If it is desired to institute a tax system that is beneficial to the working poor, what could be more beneficial than paying zero taxes?
Some who talk of fairness speak of fairness using the ideology of the progressives embodied in a phrase used often by President Obama, "The wealthy are not paying their fair share."
President Lincoln said, "That some should be rich shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence."
Mr. Thornton incorrectly states that a two-adult, two-child family could earn up to $31,020 before paying any taxes. In fact, a person could earn any amount and not pay taxes because there is no tax on income.
The correct statement would be, a four-person household could spend up to $31,020 per year and pay no federal sales tax and that is an important distinction.
You can earn as much as you are capable of and if you choose to live frugally, you can save and accumulate wealth for your retirement and also to pass on to your family since there would be no estate taxes. This amount would vary each year because the Department of Health and Human Services resets the poverty level each year. The Fairtax says that all spending up to the poverty level is tax-free.
Retailers would receive one fourth of one percent for collecting the tax and states would receive the same amount for administering the system and sending the revenue collected to the federal government. The Fairtax is a national tax proposal to eliminate federal taxes on income and therefore has no direct effect on any state or local tax, including property taxes.
It also would not have a direct effect on gasoline taxes or transportation taxes since those are not a direct tax on income.
I am not sure what Mr. Thornton means when he writes, "It would be alright for more sales tax, for property taxes would be such a burden on property owners."
I will just repeat that the Fairtax has no direct effect on any taxes, state or local, other than federal taxes on income.
Mr. Thornton writes, "Another principle in operation the past 30 years is cut taxes on the highest income levels, reduce programs for the most needy, and the benefit will "trickle down" from the wealthy to those most needy.
To say that we have in any significant way reduced spending for the needy is inaccurate. Spending on means-tested programs is at an all-time high and is a significant and continuing driver of our deficits and federal debt.
Mr. Thornton writes, "Too many politicians curry favor with the wealthy and write laws for tax shelters and benefits to them. Those at the top level of income do not have to spend all but can 'store away' and do not add to our economy."
The first statement is all too true and is a primary reason why we should adopt the Fairtax. There are approximately 24,000 lobbyists in Washington and 50 percent of their efforts are devoted to obtaining preferential tax treatment for their employers.
The Fairtax would eliminate this practice because there would be no income tax to seek relief from. Every year, Congress passes tax preferences that have an expiration date, usually in two to five years. The list of preferences expiring this year contains 72 items.
Some examples of these preferences are: Depreciation for certain racehorses, credit for plug-in vehicles and small electric vehicles and tax incentives for alternative fuels.
For this year there is a list of 72 different tax preferences that are expiring. There is a similar list of expiring credits every year and when their particular preference is expiring, lobbyists return to Congress to extend them.
To accomplish this, they contribute heavily to the appropriate Congressman's reelection fund. This is a legal form of extortion and there is a similar list of expiring tax preferences every year. Under the Fairtax this would cease to exist.
To say that "top earners store away income and do not add to our economy" is a misunderstanding of how a properly functioning free market economy works. Capital formation is the lifeblood of our economy. To start new businesses and expand existing ones, capital is needed. Where is that capital found -- in the savings of every-day citizens and yes, wealthy citizens.
The Fairtax is indeed fair, it is also simple, easily understood, easy to comply with, a more efficient way to fund our government, eliminates the IRS and all of its power and abuses and by consensus of all economists who have researched it, grows our economy at a much faster rate than our current system.
I close with another quote from Lincoln: "I don't believe in a law to prevent a man from getting rich; it would do more harm than good. So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else."
A Constitutional Conservative,