Fair Tax Act taxes the imagination
Advocates Say the Fair Tax Act Proposal is a Better Way to Tax
The Fair Tax Act Proposal, Advocates Say, Would Lower Taxes, Increase Revenues and Level the Playing Field
If Ollie Johnson and a couple of thousand other fed-up taxpayers get their way, the way we fund our national government’s spending will dramatically change. Johnson, a regional vice president with Primerica, is working to see that a little-known piece of federal legislation eventually is made the law of the land. Put simply, the Fair Tax Act proposal would eliminate the current income-based system of taxation and replace it with a national sales tax. While that sales tax would – on its surface – seem steep (current estimates run around 13 – 23 percent, depending upon the source of the information), Johnson and his fellow advocates point out that actual prices would not rise even close to that percentage.
“You have to understand that there already is an embedded income tax in every item you buy, every single service you use,” Johnson explained. “This is because all those corporate taxes that businesses currently pay at every level of the manufacturing, marketing, supply and distribution process is passed along to consumers in the form of increased prices.”
For example, Johnson claims, a $10.00 item in a store actually has an estimated $2.20 of embedded taxes contained in the purchase price. If the Fair Tax Act were enacted, that $10.00 item would now have a natural base price of only $7.80. Adding a sales tax (of whatever percentage) to that true base would make the actual cost of that same $10.00 item rise to be sure (Fair Tax advocates say the new figure would be around $12.00 - $13.00).
“But don’t forget that your paycheck would also rise accordingly,” he stressed. “There would be no more federal withholding or social security taken out.”
To counter any adverse effects that higher prices might have on the population anyway, Fair Tax advocates have also floated the idea of sending each household a “pre-bate” check on a regular basis. They claim that the federal revenue to do so would be there with the sales tax plan.
“We would not qualify income groups to get this pre-bate,’ he stressed. “Whenever you do something like that, you create a whole new bureaucracy that you have to support with federal revenue.”
It would be far cheaper, he added, to just send the check out to everyone. For the rich, they wouldn’t matter much, For working people, they would take away the sting of higher prices.
“But, don’t forget, richer people tend to be bigger consumers, and they buy more expensive goods, so they would still be paying more into the system in actual dollars….do you know how much (sales tax) would be paid on a fancy car – or yacht ?”
According to Fair Tax advocates, the elimination of federal income taxes would also foster a strong spurt in small business growth and economic development, because staff-strapped small businesses would no longer have to shoulder the overhead costs of just getting the paperwork done for their tax payments.
A few groups that could be adversely affected, however, would be the individuals who rely on that administration for their living: tax lawyers and accountants and, of course, the IRS itself.
“The private sector or other government agencies would absorb the IRS workers,” said Johnson, “and we’re all pretty sure the tax specialists would simply specialize in another area of their industry.”
Currently, the legislation has made it as far as the appropriate congressional committee, but it lacks enough support on either side of the political aisle to make it onto the floor for a discussion or vote. That action is what the Fair Tax advocates are now working towards – and their numbers are growing, especially in southern and western states, where the support for the change seems to be the highest.
“I believe we will get there,’ said Johnson. “It may take a few years, but this make so much sense, and support for a fundamental change in the our taxation system is growing.”
