FairTax is a Fair Tax

by Adam Thompson

Taxation should be fair for everyone. With the lengthy paperwork, forms, and obfuscated rules, many Americans have to hire someone to file taxes for them. Not only this, if one is wealthy enough, there are enough loopholes to almost escape the burden of taxes completely.

The weight then falls on the middle class. With no way to control the amount of money that one puts into the system, the current tax code is both unfair and is too lenient on those who have the means to manipulate the fallacies in it. The only truly just tax plan would involve the elimination of these unfair taxes (income tax, property tax, estate tax) and replace them with a simple sales tax.

Granted, the new sales tax would make everyday items more expensive (the cost would increase by around 30 percent, the scaled approximate of a 23 percent income tax), but with a gross income to spend, the difference would be quite manageable. The genius behind a strict sales tax lies in the fact that one can control how much tax he pays, or rather, the amount one pays is proportional to the amount he spends. There would no longer be any means for the rich to escape tax relief (they, in general, spend more), thus solving a taxation problem faced for years.

Furthermore, necessities such as food and clothing would be tax free (excluding luxury items such as articles of clothing over a set amount and non-essential foods). The poor, consequently, would not be punished with a regressive tax on the necessities of life.

Many against of this type of tax plan (sometimes referred to as FairTax) argue a high tax would have a negative effect on the economy. Naturally, they argue, if one is taxed at a high rate, people will not purchase as many “luxury” goods, and the number of businesses that manufacture and place headquarters in the United States would be jeopardized.

After studying the impacts of the FairTax plan, however, many economists have determined the opposite. Without losing income to taxes along with the continual property taxes, people will have more money to buy more items. Furthermore, according to the National Bureau of Economic Research, the Gross Domestic Product under this type of taxation system would increase by about ten percent, salary by eight percent, employment by four, and capital stock by forty-two percent. In a poll of five hundred companies, four hundred stated they would either open up a manufacturing plant or move their headquarters to the United States if all taxes were replaced by a high sales tax.

With all of the benefits of a high sales tax, why hasn’t the United States implemented it? Why haven’t more Americans heard of it? The answer lies in the fact that the United States does not wish to change. Primarily, the power to enact an income tax is an Amendment to the Constitution, and changing to a simple sales tax would result in the repeal of this Amendment. (That’s hard to do!)

Additionally, a more lucid tax plan would disintegrate the need for many IRS agents, accountants, and other businesses constructed to help the citizen pay his taxes. Lastly, and probably most importantly, is the fact that the government would certainly have to scale down spending. By eliminating miscellaneous taxes such as estate and property, the government will be losing some of its expected income. Programs and pork barrel legislation will need to be cut to make this system work.

Though both Democrats and Republicans would lose a base agenda (raise taxes vs. lower taxes), the country would ultimately benefit – bringing the American economy to a new level of power and wealth.