FairTax would replace federal tax system with simple alternative
Sunday, January 09, 2005
Women did not win the right to vote through quiet parlor discussions alone; they also marched in the streets. Unions did not achieve collective bargaining until they sat down and shut down manufacturing plants. Blacks took their seats at the front of the bus and at the lunch counter, and then took to the streets. These grassroots successes set the example for how we replace our fatally flawed income and payroll tax systems. As for a rate comparable to income/payroll taxes, delivering the same revenue raised today, an organization I support (FairTax.org) quotes 23 percent. This rate is generally confirmed by many of the leading public finance economists in the country: Dale Jorgenson, Harvard (22.9 percent ); Jim Poterba, MIT (23.1 percent ); Laurence Kotlikoff, Boston University (24 percent); and rates from 22.3 to 24 percent from Stanford University, The Heritage Foundation, The Cato Institute, and Fiscal Associates.
Under the FairTax, effective tax rates go down for the middle class. Their paychecks come to them complete, with no federal withholding of any kind. Their paychecks are no longer minus the regressive Social Security tax, which is even more painful to working poor.
Gone would be the dooms-day threat of huge payroll tax increases to fund much needed Social Security reform. Under the FairTax, no American pays a dime of tax, hidden or obvious, on the necessities of life up to the poverty level. Individuals keep no records, file no returns, and suffer no audits.
Financial institutions are no longer required to perform taxpayer surveillance operations. Under the FairTax, individual American taxpayers become invisible to the federal tax collector, as do their families, churches, and businesses.
A net tax increase or tax decrease? This will be up to the individual. How much tax they do pay is entirely based on how they choose to live their lives.
The FairTax is progressive, substantially lowering rates for lowest-spending Americans when compared to the current system, keeping them low through the critical lower-middle class range, and approaching the maximum, effective tax rates only for our biggest-spending wealthy. For a chart demonstrating this progressivity, use this link: www.fairtax.org/imag es/taxrates.jpg
As to evasion, we are Americans, we hate taxes, and we have ingenuity to spare. We will cheat very successfully. However, with a 90-percent reduction in points of surveillance, record keeping, filing, compliance, and enforcement, when compared to the income tax system, the FairTax makes enforcement a relatively easy task.
Not to impugn the hard and successful work of the current state sales tax organizations, which have the option to collect the new federal tax. Their compliance statistics are much better today than the IRS's. To aid these organizations further, a common federal base simplifies their collection of sales taxes incurred by Internet or catalog sales. And with some 90 percent of sales taxes collected by less than 10 percent of retailers, do you really think Cindy Consumer is going to charm Charlie Cashier at Wal-Mart into collusion to violate federal tax laws?
Imported goods pay the tax, so there is no advantage of cross- border transactions for law- abiding citizens, though the FairTax is no violation of our current trade treaties.
Finally, I've not touched on the job creation, financial services, charitable giving, and residential real estate boom, and robust, deficit-shrinking economy economists say the FairTax engenders. We in the grassroots certainly do need to drive our elected servants onto the FairTax legislation.
Newport Beach resident Peter Uberroth in 1984 was president of the Los Angeles U.S. Olympic Organizing Committee and and was named Times Man of the Year. He was also a major league baseball commissioner and a former candidate for governor of California. Visit the FairTax Web site at FairTax.org.