Jan 8
The Real Truth About Huckabee’s Fairtax
Although I am a Ron Paul fan, I have found the level of misinformation concerning Huckabee’s tax plan to be atrocious. I wrote this paper for an English assignment in tenth grade. If a tenth grader can understand it, so could a news reporter. I thought I would spread the truth about the Fairtax rather that let the MSM get away with its gross misrepresentation of it.
We all know congress is filled with change-fearing ultra-conservatives and socialist liberals. Income tax was introduced to America by the first Republican President, Abraham Lincoln, to increase funding for the civil war. Our current taxation system was put in place by Theodore Roosevelt in 1913. Although Teddy may not have had the best of minds in 1913 to come up with a better system, it is unacceptable for our government to not have reformed or even replaced this taxation system with a better system in all these 93 years since it was put into place.[1]
The taxation system in effect at this moment has been broken since it was first put in place: It has too many loopholes and too many complications. The average single American makes around $36,995, according to a 1999 study[2], putting them in the 25% income tax bracket[3], meaning he pays 25% of his annual income to the government, a staggering $5,913.75 with the base tax figured in correctly.
The tax system we have right now borders socialism. The income tax brackets currently range from 10%-35%[3] based on “how rich you are”. Socialism was a method of leveling out incomes to make sure that everyone makes the same amount of money. Karl Marx, in his Communist Manifesto, wrote a list of ten goals a state must achieve in order to become an official Communist nation. Number two is “A Heavy Progressive or Graduated Income Tax”, and number three is “the Abolition of all rights to Inheritance” (The Estate/Gift Tax)[4]. Having a progressive tax system (which is in place in the United States) is socialism. With it the percentage of income you pay rises with the amount of income you make, lessening the tax burden the poor would endure and disproportionately shifting it upon the rich’s shoulders. As you can see there are many problems with this.
A great number of the members of the top tax brackets hire consultants to help with the complicated ways of tax deductibles. Others lessen it illegally. As you can see there are many ways to do this. Some have their incomes paid to offshore accounts in foreign countries, totally avoiding income tax. Others have their paychecks cut into different portions and sent to different banks. This would make their income appear less and therefore lessen the percentage of their income they pay. Others still avoid tax by living off of odd jobs that are considered “favors” such as babysitting and other services the government is not aware of.
As you should now realize the “income” tax system can only collect tax off of people who make a legal income, official, documented citizens with official, documented occupations. People who make a living off of the black market don’t have there income on record with the government and therefore make a gross income and can spend it all. They do not pay any taxes except the sales tax their state may levy for its own source of income. The Income Tax system in place now requires the IRS to be ran at an almost obscene size for a revenue collector. The current tax system is so complicated when it comes to exemptions that some 12,000 employees are required to simply answer telephones for confused tax payers during filing season. The current tax code is so intricate that 136,000 employees are required for merely administering the code. Each year, the government spends $13,700,000,000, yes, that’s thirteen billion seven hundred million dollars. on the IRS and other government agencies regulating the tax system. That’s money well substituted into the countless other branches our tax money goes to[5].
Another extremely prominent problem with our current tax system is the concept of double taxation. Many people believe corporations should be taxed more heavily to lessen the taxes on individuals. This is the stupidest move one could make in their life. Businesses simply add that tax to the product’s price, therefore effectively allowing the governemt to “double-tax” you: once when you receive your paycheck, and second when you spend what little net amound you were allowed to keep. What’s really frightening is the history of this little double-taxation concept. To look at the highest tax bracket through history side by side with the corporate taxes of the day it shows that the lower the income tax the higher the corporate tax and the higher the income tax the lower the corporate tax. This may sound like gibberish but look at it this way: In the 1940’s the highest tax bracket was around 80%, the corporate tax, for the sake of math, was about 10%. That means that after you recieve your money and after you spend it the government has effectively taken 90% of your income. Now in 2006 the highest tax bracket is about 35% and the corporate tax, around 40%. Granted the total taxation has gone down about 15% (attributed to the great Ronald Reagan and his massive tax cuts), but to look at it from 90% of your income to 75% of your income taxed over the period of 60 years is a lot less of a reduction than the 80% to 35% the government would want you to believe. Therefore you can effectively say the government could literally tax you the same and you think you were being taxed less. Today about 20% of a product’s price is attributed to corporate taxes.[4][6]
Now there is an answer to all of these problems we face with our tax system: a National Retail Sales Tax. A retail sales tax is levied by most states already, and is quite easily ran: the businesses simply add the tax onto the price. If a national sales tax was proposed the loopholes are eliminated, the IRS is completely dissassembled and the tax burden is spread out upon every person that spends money in the United States, be it a tourist buying a souvenir on his vacation, or an illegal alien purchasing personal goods, or even a drug dealer buying his new Mercedes Benz. This would dramatically reduce the tax burden most people suffer by spreading it out upon all of the people spending money in the United States. The sales tax would of course replace personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.[4]
Many supporters of a national sales tax believe that food and medical supplies should be exempt. This is both foolish and corrupt. Many respected economists have done studies in which they show that the rich spend much more on unprepared food, clothing, medical supplies, and housing than do the poor. This would actually lead to a disproportionate advantage for the rich.[7]
There have been many bills introduced in congress that support a tax replacement such as the national sales tax proposes. Many of those fail. In my research I have found a lobbyist group that has two bills proposed, and a number of Representatives and Senators that support them. The group is called FairTax Volunteer. The group has calculated a 23% National Sales Tax Rate would be sufficient to produce the same amount of revenue the government currently makes, and could possibly increase it with the decrease in the size and spending of IRS. And, when subtracting the 20% of a product’s price attributed to corporate taxes, and then adding the 23% of the sales tax, you are actually feeling only a 3% price increase, which is phenomonally low coupled with the complete removal of all taxes taken out of your paycheck. You have more money left over.[4][7]
A national sales tax could potentially bring this country out of deficit while decreasing the amount of money the average American pays in taxes. This would lead to a more prosperous government, people, and industry all at the same time.
Sources Cited
[1] Income Tax In the United States Wikipedia.com Article
[2] “How We Spend Our Money” SeaCoastOnline.com Article
[3] Tax Brackets Article SaveWealth.com
[4] The FairTax Book by Neal Boortz and Congressman John Linder
[5] Interesting Tax Facts Article ScrapTheCode.com
[6] Dividend Tax Wikipedia.com Article
[7] www.FairTaxVolunteer.org
Note to reader - This paper was written by Michael Sendker in Tenth Grade.
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