FairTax a Better Plan To Reform Tax Code
In his Sunday (Oct. 15) News Register article, Eagle Manufacturing President and CEO Joe Eddy was right on target in stating the need for tax reform. For too long, American manufacturing has had to take second place behind foreign competitors due to our punitive tax laws. But the current proposal — even before Congress weakens it in favor of special interests — is nothing more than “tinkering around the edges” of a tax code that will inevitably spring back to its current form like a bungee cord that had been stretched to its limit.
As a board member of the National Association of Manufacturers, Mr. Eddy should know of and vigorously promote a bill currently in Congress known as HR 25 — The National Retail Sales Tax proposal (aka The FairTax).
Rather than cut the current corporate tax rate to 20 or 25 percent, the FairTax eliminates it altogether. As Mr. Eddy points out, “more than 80 percent of business taxes are borne by the workers.” The FairTax would lift that burden off the backs of American workers and would allow businesses — driven by competition — to lower prices and compete on a “level playing field” internationally as well as domestically.
The tax reform proposal currently being discussed in D.C. keeps the payroll taxes in place. These are the most regressive part of our income-based tax system, as they hurt the people the most who are least likely to be able to afford it — the low income workers. That proposal also does nothing to rein in the IRS — the most feared collection agency in America today.
The FairTax, on the other hand, eliminates all income-based taxes for both corporations and individuals alike and replaces them with a single, imbedded national sales tax on all services and new retail sales. The current 70,000-plus page Internal Revenue Code is replaced with a 185-page National Retail Sales Tax Code that does not require an accountant, computer software, or lawyer to understand.
To avoid the usual regressive impact of a sales tax each legal American household would receive a rebate of the taxes they could be expected to pay on purchases they consider “necessities of life.” This rebate is called the Family Consumption Allowance and is paid out at the start of the month — leading to its more common name of “prebate.” This prebate is the exact same concept as the Individual Standard Deduction in our current system.
Rather than bearing the brunt of 80 percent of all businesses taxes, employees would finally take home a paycheck free of any federal withholding.
Visitors to the U.S., illegals, underground workers (drug dealers, etc.), and those being paid “under the table” would pay The FairTax whenever they purchased new retail goods or services. Used items would not be taxed since they would have been taxed previously. The only exclusion to this sales tax would be for educational tuition and fees since those are considered to be investments in “human capital.”
With no business taxes to worry about, businesses around the world would flock to the U.S. and either expand existing facilities or build new ones. America would become a tax haven for foreign investment. As the economy starts to grow the demand for American workers would necessarily increase and income levels would rise as employers compete for workers.
Now for a sharp jolt of reality: Members of Congress do not want to implement The FairTax. Congress members pick winners and losers in the American economy by accepting lobbyist contributions to their reelection campaigns in return for favorable votes on corporate tax measures. The FairTax would eliminate the need for most of these tax lobbyists and the campaign contributions would eventually dry up. It has been said The FairTax would constitute the largest transfer of power from Congress to the American people in U.S. history.
But it will depend on you to get involved, learn more about The FairTax (www.fairtax.org), and tell your Congressional representative you want The FairTax, not some easily-changed weak attempt at “tax reform.”
If your organization would like to learn more about The FairTax, I would welcome the opportunity to meet with you. Contact me at (304) 280-3688.
Americans for Fair Taxation
Ohio 6th Congressional District