
For a loud-mouth right-wing radio host who I would usually be eager to criticize, Neal Boortz is surprisingly right on the money with The FairTax Book (coauthored by Georgia congressman John Linder). In fact, I just read the entire book in one sitting completely enthralled by its brilliance. That is exactly what the proposed FairTax system is, brilliant, and the fact that only two ultra-conservative candidates support it (Huckabee and Paul) is baffling.
The truth is this; the current tax system in America is a joke. Its complexity is unnecessary to the point of absurdity and the loopholes it allows, especially to the wealthy, are completely against the morals this nation was founded on. Not to mention that the entire idea of an income tax is unconstitutional under Article 1, Section 9 which reads “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census of Enumeration hereinbefore directed to be taken.” Billions of dollars in revenue are currently lost due to tax evasion, and no one seems to be doing anything about it.
That’s where the FairTax system comes in. To put into the simplest terms possible, a FairTax system is a proposal to abolish the Internal Revenue Service (IRS if you didn’t catch on) and replace all existing taxes, including the income tax, with a national sales tax placed on all retail items. Rather than taxing income, the government would be taxing consumption. Its important to note that this system does not raise or cut taxes; it simply generates the same amount of tax revenue in a transparent and logical way.
To account for the disproportion of income consumed by the wealthy in comparison to the poor, the system also has in its proposal a “prebate” that every household would get every month to cover the taxes on all necessities up to the poverty line. This would eliminate nearly all sales taxes on the poor, in addition to keeping every penny they make from their paychecks. And this is supposed to be a right-wing idea? You would think Ralph Nader would draw up such a proposal!
Another impressive economic phenomenon the FairTax takes advantage of is that of embedded taxes. Based on research done by Dr. Dale Jorgenson, chairman of the Harvard Economics Department, 22% of the price paid for a consumer product represents embedded taxes. These are costs that producers pass on to consumers in order to pay their required taxes. If the FairTax is put in place, these corporate taxes would be removed and ultimately, based on simple market competition, the prices of all consumer goods would drop dramatically. Once the 23% sales tax required by the FairTax system is added to the 22% drop in prices, Americans would be paying only slightly more for their products, while eliminating all other form of taxation.
At this point I though to myself, “There is no way this system could ever create the required revenue that the federal government requires.” This is where the genius of the plan really shows its face. Under the current tax system, billions of dollars in revenues are lost in two ways: underground economies (illicit drug market) and overseas in banks that the government can’t touch. Even though this money is spent in our economy, none of this money is taxed. That would all change under the FairTax system. Even though they don’t file income taxes, drug dealers and those who hide money in foreign banks still spend money which would now be taxed and generate new revenue for the government. Unless you refuse to spend money, tax evasion would be impossible.
After thoroughly learning the simplicity and effectiveness a FairTax system would have on our nation, it is hard to see why so few people know about it. Perhaps it is too radical an idea for a predominate candidate to support. Maybe its association with right-wing talk show hosts is too much for people to take seriously. Whatever the reason, it’s a shame. Because the FairTax system is the correct and revolutionary solution to the failed and abused tax system America is currently struggling with.
The truth is this; the current tax system in America is a joke. Its complexity is unnecessary to the point of absurdity and the loopholes it allows, especially to the wealthy, are completely against the morals this nation was founded on. Not to mention that the entire idea of an income tax is unconstitutional under Article 1, Section 9 which reads “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census of Enumeration hereinbefore directed to be taken.” Billions of dollars in revenue are currently lost due to tax evasion, and no one seems to be doing anything about it.
That’s where the FairTax system comes in. To put into the simplest terms possible, a FairTax system is a proposal to abolish the Internal Revenue Service (IRS if you didn’t catch on) and replace all existing taxes, including the income tax, with a national sales tax placed on all retail items. Rather than taxing income, the government would be taxing consumption. Its important to note that this system does not raise or cut taxes; it simply generates the same amount of tax revenue in a transparent and logical way.
To account for the disproportion of income consumed by the wealthy in comparison to the poor, the system also has in its proposal a “prebate” that every household would get every month to cover the taxes on all necessities up to the poverty line. This would eliminate nearly all sales taxes on the poor, in addition to keeping every penny they make from their paychecks. And this is supposed to be a right-wing idea? You would think Ralph Nader would draw up such a proposal!
Another impressive economic phenomenon the FairTax takes advantage of is that of embedded taxes. Based on research done by Dr. Dale Jorgenson, chairman of the Harvard Economics Department, 22% of the price paid for a consumer product represents embedded taxes. These are costs that producers pass on to consumers in order to pay their required taxes. If the FairTax is put in place, these corporate taxes would be removed and ultimately, based on simple market competition, the prices of all consumer goods would drop dramatically. Once the 23% sales tax required by the FairTax system is added to the 22% drop in prices, Americans would be paying only slightly more for their products, while eliminating all other form of taxation.
At this point I though to myself, “There is no way this system could ever create the required revenue that the federal government requires.” This is where the genius of the plan really shows its face. Under the current tax system, billions of dollars in revenues are lost in two ways: underground economies (illicit drug market) and overseas in banks that the government can’t touch. Even though this money is spent in our economy, none of this money is taxed. That would all change under the FairTax system. Even though they don’t file income taxes, drug dealers and those who hide money in foreign banks still spend money which would now be taxed and generate new revenue for the government. Unless you refuse to spend money, tax evasion would be impossible.
After thoroughly learning the simplicity and effectiveness a FairTax system would have on our nation, it is hard to see why so few people know about it. Perhaps it is too radical an idea for a predominate candidate to support. Maybe its association with right-wing talk show hosts is too much for people to take seriously. Whatever the reason, it’s a shame. Because the FairTax system is the correct and revolutionary solution to the failed and abused tax system America is currently struggling with.


