Tax Talk

Disclaimer: I decided to come back and add this bit here at the beginning just so no one accuses me of bias. I am the 99%, to utilize a phrase I'm tired of seeing/hearing. Truth be told, at the moment this post is being written, I am unemployed. I do not earn more than a million per year, net or gross. I do, however, respect those who do, and don't wish to think of them as smoking cigars and twirling moustaches, thinking of ways to rob me. Just so we're clear.


I mentioned taxes before. This is the one thing that could turn me into a one-issue voter. Find me a candidate - Republican, Democrat or Other - who shares my views on tax reform, and I would vote for him/her (or even an it; it's that important to me) in a heartbeat. 


Lately, we hear a lot of talk about terms like "fairness," "income inequality," "fair share," "99%," et al. from politicians and the media. I agree that our current progressive tax system is unfair, but not in the way that they do. 


The top 10% of income earners in this country shoulder roughly 70% of the federal income tax burden, while the bottom 50% of earners account for approximately 3%. What's more, those who receive the majority of benefits from federal programs are those who pay little to no taxes. So, I ask you, where is the "fairness?" What I see of this country's tax code already borders upon, "from each according to his ability, to each according to his need," a phrase that makes my blood boil. If you know where it comes from, good for you. If you believe that that single concept is the seed of destruction of society, then I would hug you if I could.


I want tax reform for this country more than anything. And I'm sure you're thinking, "ok smart guy, if you know so much, how would you reform the tax code?" If that's what you're thinking, good, I applaud you for thinking. My answer is, quite simply, the "Fair Tax." 


If you want to truly understand the Fair Tax plan, I urge you to read The FairTax Book, by Neil Boortz. It's only 200 pages, and is written for the average Joe. Not a lot of jargon, just basic economics explained in a very accessible way. I would describe it as life-changing. I will however try to sum up the key points here.


The concept of the fair tax is basically a federal sales tax. 


It is important to understand that every purchase you make in this country gets taxed at every step of its production. Not in the sense that European countries apply a VAT (Value-added Tax), but rather because each producer in the chain pays payroll and other corporate taxes. This is called an "embedded tax." The average "embedded tax" on all goods purchased in this country is approximately 22%. That means that, everything sold in this country costs about 22% more than it would if no corporations had to pay taxes. 


Some clever economists have crunched the numbers (more specifics in the book) realized that, if you eliminate the federal income tax, all corporate taxes, inheritance taxes, capital gains taxes and the vast (read: expensive) bureaucracy that is the IRS, then the federal government could operate at its current level (written in 2005) with a 23% sales tax on everything.


The core concept is, the more you buy, the more you pay in taxes. The wealthy buy more things, because they have more money, ergo, they would pay more taxes. However, they would be able to determine how much they pay in taxes simply by determining how much to buy. At the end of the day though, prices will stay approximately the same as they are now. Supply and demand make sure this part works, trust me.


Another key point. That everything up there does include food, but the Fair Tax plan includes a monthly stipend to all families in the country on a per-person basis to cover those taxes on the basic groceries needed. If you only buy groceries that you need (bread, milk, eggs, cereal, meat, fruits and vegetables, etc.) at reasonable prices, the stipend will offset the increased food prices. If you want to buy caviar, fillet mignon and champagne for every meal, the stipend will not offset your costs.


What all of this means for the American citizen:
- NO FEDERAL INCOME TAX (big one)
- No witholding for taxes on your paycheck means more money in your pocket
- Prices of all non food items would increase by roughly 1%
- Prices on food would go up significantly
- The stipend everyone receives would offset this rise in food prices
- The money you invest will not be taxed


What all of this means for American corporations:
- Businesses, large and small, can grow because they keep the money currently pay in taxes
- Businesses can grow because investments will be untaxed
- With a corporate tax rate of 0%, America is the tax haven of the world, meaning:
      - American companies that have left will come back
      - Foreign companies will move to America
      - Jobs will be created

More jobs, more money from each paycheck for every American. I'll say it again, life-changing.


Additionally, this tax system is as transparent as it gets. There are no hidden loopholes, no wasteful bureaucracy, no way for legislators to change the tax code without it being abundantly clear to every American whether taxes are going up or down, and by how much. If you don't like it, tell your Congressmen. If they don't listen, buy less and pay fewer taxes in protest. 


Finally, this is NOT a "flat tax." This tax plan is, as the name implies, fair. It is also, broad, brilliant, and desperately needed in this country. I've done my best to highlight the key points,  and if you're on board now, great, but go read the book. If you have more questions, or think it's a stupid idea, go read the book. If, after you've read it, you still think it's a stupid idea, then I don't know what to say, because I deal in logic, not whatever you subscribe to.