FairTax basics-in laymens terms

If you have never heard about the FairTax then I strongly encourage you to go to www.fairtax.org or to buy The FairTax Book by John Linder and Neal Boortz, in the meantime, if you read on you will learn the basic’s of it. Before I get started, I am admittedly a huge supporter of the FairTax, but in no way am I being paid to propagate it. I am merely a very vocal supporter and believer in the FairTax, which has the ability to not only turn our economy around instantly, but also put us back were we belong in the global economy-as it’s leader.

The FairTax (known as H.R. 25 in Congressional lingo) is a plan currently before Congress which replaces the current system of taxation in America. Essentially the FairTax is a tax on consumption (i.e. sales tax), but it is not a tax of addition to what we have now, it is a tax of replacement to what we have now. So don’t think that if it were passed things would cost 23% more (the current estimate of the FairTax) than they do now. To the contrary, in many cases-such as medical services-goods and services would cost less.

To properly understand the beauty of the FairTax you have to understand 2 things first: free market capitalism and the fundamentals of our current system of taxes.

In free market capitalism the consumer (i.e. purchaser or buyer) dictates the success and failure of goods and services, as such this ideology puts you, as the purchaser/buyer, in a position of power. Unfortunately, most American’s either do not realize this or are incapable of accepting it as a supposed “leadership” role they do not want. Either way, whether you think it or not, as an American buyer, you have power in our economy, which is a great thing.

The current system of taxation in America is one of taxing income-on individuals and businesses. More properly, it’s a taxation on earnings and/or profits, but I will stick with a taxation based on income because that is an ideology which everyone understands. Something which people are not aware of as it relates to our current system of taxation is that it was illegal until the 16^th amendment was added to our constitution in 1913. In it, the power was granted to our Federal Government to collect and assess taxes on our incomes. To grasp how extreme this idea was, you have to first realize that, to most of the founding fathers of our nation, national governments had no business assessing and collecting taxes on the public at large because this was seen as a symbol of servitude and/or enslavement: only Kings and Dictators collected taxes, they believed, and they weren’t set about creating a government of either. They were creating a government by the people, for the people and of the people. So, needless to say, the idea of setting and collecting an income tax was an extreme one even when the 16^th Amendment was added in 1913.

At first, the American “Income tax” was set as a simple percentage where by American’s took how much they made each year, multiplied it by a set percentage and wrote the Fed a check for that amount. However it wasn’t long before Politicians discovered how vastly so “simple” a system of taxing incomes could be manipulated and once the idea of “withholding” came into being the current 60,000 or so pages of I.R.S. codes and regulations that we know of today were well on its way to reality.

What this has to do with you and the FairTax is quite simple really. You see, everyone-and every business and corporation-is taxed in some way by our Federal Government. Businesses-both large and small-consider taxes an expense and, like all expenses, they are incorporated into the cost of the goods and services that we, the consumers and purchasers, eventually pay for. Now, the people who have been working on the FairTax for the last 20 years or so have hired many an economist (of both a republican and democratic political ideology) to find out exactly how much of the price of goods we pay is in these embedded taxes prior to paying a state sales tax. The number they came up with varied depending on the industry from 22-26%, of which, the writer and supporters of H.R. 25-the FairTax bill-settled on 23%. (When thinking of this number, keep in mind the vast amount of taxes a business pays. Not only do they pay taxes on their incomes, but they also pay payroll taxes, workers compensation taxes and matching social security taxes to name a few other taxes that they have to pay, which is one big reason why it's so hard to start and stay in business in America).

What the FairTax does is this: it rewrites our tax code and removes all of these embedded taxes which you and I, as consumers, pay for anyways, and replaces them with the FairTax. What would happen is that, at the point of sale, the price we pay for goods and services would be cheaper before the FairTax (and your state sales taxes) are added to it. Because that 23% of previously embedded taxes has now been removed from the cost of what you are buying, the price you pay ends up being the same after the fair tax is added back on (in some cases it will be cheaper). One of the neat things is, that your receipt of sale or bill of goods will reflect this price and how much tax you paid to the Federal Government.

So what does it mean for you and I, the consumers? A lot; it means no more filling out of tax forms and filing a return every year. It means no more taxes on “interest earned” or “capital gains. It means that if you make $500 bucks a week, you keep $500 bucks a week. It means that, individually, we have control over how much in taxes we contribute to our Federal Government each year (not owe) because the tax we pay is based on our spending habits and not on our income. In a nutshell, it means real freedom for you and I.

For businesses it means even more (which means more for you and I as well).

For them it means no more payroll and corporate taxes, which would make it very desirable for companies to establish their regional and global headquarters in America (and producing their goods here too), thereby creating 1000’s, if not millions, of new jobs for American’s. It means new industry and growth and it also means economic stability and putting America’s economy ahead of every other economy on the planet. Most importantly, I believe it will mean accountability to us, the voting public, on the part of our nationally elected leaders-which is something they haven't had to worry about in decades.

Of course this is a very scaled down analysis of the FairTax and I’m sure you have many more questions about it, for which I would direct you to www.fairtax.org or The FairTax Book for answers…Hopefully you will become as vocal a supporter of the FairTax as I am, and help to make it reality so that we can take back control of our money from the government.