The Fair Tax

I hate income taxes.  Yes, of course everyone hates paying taxes (even those who think taxes should be higher, at least for other people).  I mean I hate the income tax in particular.  The reason isn’t the amount, it is the difficulty involved in paying the thing. 

I use an accountant, and still I hate preparing income taxes because I need to still spend hours preparing the information for him and sending it all out in the mail.  Every year each American, whether he owes taxes or not, must sit down and spend hours under threat of fines and imprisonment preparing and sending in income tax forms.  He must pay for preparation, whether it be an accountant or tax software, copies, postage, gas, and other amounts just to submit his taxes.  If one doesn’t submit taxes, the IRS has an unbelievable amount of power in collecting those taxes, putting themselves well ahead in line of any other creditor. 

I also hate that most Americans end up making an interest free loan to the government (remember that big refund you got?).  I hate that politicians use the income tax as a means of control (Put in any energy-efficient appliances this year?  Keep that home loan around for longer than needed?) and then complain that people are using “loopholes” to avoid paying taxes.

Despite the risk, many people cheat on their taxes.  I don’t mean cheat a little, I mean cheat a lot.  People take money under the table to avoid taxes.  People make ridiculous claims on charitable donations (how much were the Clinton underwear valued at on their taxes?).   Remember how hard it was for President Obama to appoint a cabinet because practically everyone he nominated had not paid all of their taxes?  Even the guy in charge of the Treasury – the very top boss of the IRS now – hadn’t paid all of his taxes!  This means that the rest of us honest people end up paying more to make up for all of the people who are cheating.

There is a better way.  It is called the Fair Tax: 

Here are some of the basic facts:

1.  The Fair Tax replaces the income tax, Social Security Tax, Medicare Tax, and other taxes with a national sales tax.  This means there would be no need for tax planning, filing returns, or ever worrying about the tax consequences of your actions.  This also means that saving would be rewarded and spending punished – the way it should be instead of the current system which does the opposite.

2.  The Fair Tax is not regressive because every person would get a “Prefund.”  Basically a big check at the start of the year to offset sales taxes that then would be paid.  For example, if you gave out a $10,000 prefund, no one making less than about $50,000 per year would pay any taxes, even if they spent all of their money during the year.  Set the prefund higher or lower to adjust the level of progressiveness.

3.  The Fair Tax rate is expected to be at about 20%, but it is expected that the reduction in paperwork and tax planning businesses would need to do would cause prices to drop, possibly offsetting most or all of the tax.

4.  You would receive your entire paycheck each month.

5.  There would no longer be tax advantages for certain groups (e.g. married couples or single couples, those working at large companies with tax-deductible health insurance, etc….)

6.  Everyone would pay taxes, no matter how income is earned.  Even drug dealers would pay their fair share when buying their gold chains or cars.

If this sounds like a great idea, direct 10 of your friends to this blog entry to spread the word.

Then, send an email to your Congressman and Senators:

No matter what you feel about where taxes should be set, surely we can all agree that getting rid of the hassles of the income tax would be a good idea.

Comments appreciated! What are your thoughts? Questions?

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