It's time for a fair tax plan in U.S.
In this year’s election cycle, perhaps now more than ever, Americans are being asked to choose between two paths – one leading decidedly left, the other bearing to the right. Partisan issues abound with debates over the size and role of the Federal government in the lives of Americans — whether we should expand entitlements and subsidies or grow business to restart our economy. One thing that isn’t under debate is the lack of available jobs in this country.
With U.S. unemployment holding persistently at 8+percent for over 43 months, and an August Bureau of Labor Statistics report that showed a disappointing 96,000 new jobs created last month with four job seekers dropping out of the market for every one who found a job, it is clear that America’s economy needs a boost. With November drawing closer, the national debate continues over how to stimulate economic growth — whether to spend or save our way out of debt. However, many are failing to address a major root cause of the problem — the 73,608-page Federal Income Tax Code, full of loopholes, contradictions and inequities that stymie business growth and polarize Americans into haves and have-nots.
For a growing number of Americans, it is becoming clear that the only solution is replacement of the current Federal Income Tax system with the FairTax, a federal consumption-based tax on what individuals spend, not what they earn. The FairTax is a new, simple, transparent and totally equitable system of taxation that levels the economic playing field, and does away with the $13+billion-a year IRS bureaucracy.
The FairTax (HR25/S13) is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment and corporate taxes with a 23% consumption tax on new goods and services – no exceptions, exclusions or exemptions. Even so, the FairTax allows all Americans to consume what they see as the basic necessities of life free of tax.
It does this by providing a monthly tax rebate to all households to ensure that each family unit can consume tax free up to the poverty level, with the overall effect of making the FairTax progressive in application. For a family of four this tax rebate equals $6,960 per year. Included in the Plan is a constitutional amendment (HJR 16) that repeals the 16th Amendment and makes a federal income tax unconstitutional.
Last November, Americans for Fair Taxation (www.fairtax.org ) released estimated incremental revenue projections had the FairTax been in effect in 2009 and 2010. According to estimates developed by Dr. David Tuerck, Chairman of the Economics Department and Executive Director of the Beacon Hill Institute at Suffolk University in Boston, the FairTax would have generated 171 billion more revenues in 2009 and $267 billion more in 2010 than the current federal income tax system demonstrating that the FairTax system would be a more stable and reliable revenue source than the income tax.
It is also important to note that the FairTax ends the triple taxation of Social Security and Medicare funds as they are under the income tax when payroll taxes are initially withheld; the withheld payroll taxes are counted as part of gross income for income tax purposes; and finally, when the promised benefits are finally received. With the FairTax, Social Security operates exactly as it does today, except it is funded from a broad-based, progressive national consumption tax versus a narrow, regressive payroll tax.
With the FairTax, consumers will pay the actual price of a product or service with no hidden taxes, and workers will keep 100 percent of the wages they earn. Additionally, the FairTax will eliminate the 15-25 percent cost disadvantage that manufacturers of American goods face when competing in international trade.
The FairTax slashes business compliance costs and eradicates the tax wedge that drives up the costs of U.S. goods both at home and overseas. Under the FairTax, imported and domestically produced goods incur the same U.S. tax. The FairTax removes all taxes on exports, restoring the international competitiveness of American manufacturers in the global marketplace, thereby further stimulating trade.
What all this means to America is a substantial increase in the growth of the U.S. economy, creating desperately needed jobs. Consider, for example, the plight of young Americans ages 18-29, 1.7 million of which have been jobless for the past year, the highest unemployment rate for that age group since World War II. This is a generation in danger of becoming a “lost generation,” jobless and without meaningful prospects to become productive, contributing members of our society and future leaders of American commerce. The FairTax provides hope for bringing hundreds of thousands of lost jobs back to all Americans, young and old.
Make no mistake – this is not a Democrat or a Republican issue – it is an American issue. And regardless of who sits in the Oval Office, the President and Congress owe it to America to support a culture of dedicated, hardworking people in this country with an expectation of making a fair wage for the work they do. Adopting the FairTax will go a long way towards ensuring the future competitiveness of our nation, our businesses and the people who call the United States of America their home.
Leo Linbeck Jr. is from Houston, Texas, established the Americans for Fair Taxation. It has become a nationwide organization with over 350,000 members dedicated to promoting the value of the FairTax plan as a replacement for the current U.S. Federal Income Tax system.