A Better Way to Tax?

A Better Way to Tax?

After spending entirely too much time this week (not to mention a year of keeping every receipt and logging every business, charity and military mile driven) and getting ready to spend WAY too much money filing my State and Federal Taxes I thought I’d do something I’ve never done before and appropriate today’s article from another website….it’s OK they want to get the word out…what follows is a brief introduction to a tax program that just makes so much sense the only reason we haven’t done it is because special interests wield so much power in our seats of government.  Ladies and gentlemen there is a better way to tax…The Fair Tax

While I’m partial the Flat Tax proposal as well I think it’s a harder sell because so many voters have been sold on the idea that the more successful you are the more of your labor (as a percentage of your income) should be taken from you (isn’t there a word for forcibly taking someone’s labor?)…don’t get me wrong…the only thing rich about me is my imagination, my friendships and the love of my family…but I aspire to be wealthier and don’t believe that the harder someone works the more they should be indentured to government.  The Fair Tax takes that argument away because it taxes consumption (it also treats investment and dividend income the same as earned income)…and the more you make the more you are able to consume…but you could just as easily consume little and save…which is good for society as well.

The FairTax Plan

Fair TaxYour money, your decision

The current federal income tax system is clearly broken — unfair, overly complex, and almost impossible for most Americans to understand. But there is a reasonable, bipartisan alternative that is both fair and easy to understand. A system that allows you to keep your whole paycheck and only pay taxes on what you spend.

The FairTax is a national sales tax that treats every person equally and allows American businesses to thrive, while generating the same tax revenue as the current four-million-word-plus word tax code. Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate. The FairTax rate after necessities is 23% and equal to the lowest current income tax bracket (15%) combined with employee payroll taxes (7.65%), both of which will be eliminated.

Important to note … the FairTax is the only tax plan currently being proposed that includes the removal of the payroll tax.

Curious? Read some of the research listed below to see exactly how your taxes would change.

Keep Your Entire Paycheck

For the first time in recent history, American workers will get to keep every dime they earn. By eliminating federal income taxes and payroll taxes, your salary or hourly wage is exactly what you’ll deposit in the bank.

Social Security & Medicare Funding

Benefits will not change. The FairTax actually puts these programs on a more solid funding foundation. Instead of being funded by taxes on workers’ wages, which is a small pool, they’ll be funded by taxes on overall consumption by all residents. Learn More.

Get a Tax Refund in Advance on Purchases of Basic Necessities

The FairTax provides a progressive program called a prebate. This gives every legal resident household an “advance refund” at the beginning of each month so that purchases made up to the poverty level are tax-free. The prebate prevents an unfair burden on low-income families. Learn more.

Pay Tax on Only What You Spend

Be in control of your financial destiny. You alone can control your tax burden. If you’re thrifty, you’ll pay lower taxes than somebody who is not. Most importantly, you’ll be taxed fairly. Learn more about what is taxed.

Everyone Pays Their Fair Share

Tax evasion and the underground economy cost each taxpayer an additional $2,500 every year! But by taxing new products and services consumed, the FairTax puts everyone in the country at the same level at the cash register. Further, only legal residents are eligible for the prebate. Learn more.

The IRS is No Longer Needed

No more complicated tax forms, individual audits, or intrusive federal bureaucracy. Retailers will collect the FairTax just as they do now with state sales taxes. All money will be collected and remitted to the U.S. Treasury, and both the retailers and states will be paid a fee for their collection service. Learn More.

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5 Responses to “A Better Way to Tax?”

  1. Jesse says:

    I’d have to do some research but this actually makes sense (which means it will never happen).

  2. JAS says:

    This is fine for working americans, but how does it work for retirees? I am retired and currently don’t pay payroll taxes, only income tax. By making the payroll tax payable at time of purchases, you will be placing an unfair burden on older retired citizens of this country.

    • admin says:


      Ah…very good point but I’ll bet for most retirees the total tax burden still goes down. Not to mention that it’s a potential Social Security savior. I am afraid that if we don’t touch that third rail of politics (social security for future generations) we’ll end up breaking promises to you and those getting ready to retire…Social Security funding is scary math when you look at it out more than a few years into the future. My Social Security retirement (not early) age is 67 and I think we need to push that back as well. If we can get some real spending cuts (not reductions in future projected increases) as well maybe we’ll get the economic engine humming again!

      • JAS says:

        My take on the whole situation is that SS is not as bad off as they make it out to be. If it was going broke, why did they cut 2 percent from the payroll taxes? That just insured that SS would fail. It is back to where it originally was and should stay there, if not go higher. I paid payroll taxes for my entire working life and now I would have to pay them again to spend it. I have no problem with paying income tax on my pension and 401K. My tax burden would increase significantly. I pay income taxes today on my adjusted income. Under this plan, I would pay income taxes and payroll taxes (wrapped up as a sales tax) on everything I take in from my pension, SS and what I draw out of my 401K. There is no adjusted gross income on sales tax.

        • admin says:

          The temporary 2% decrease in Social Security was election year politics in action…I’m generally an optimist but I’m not very optimistic about Social Security. I encourage you to read more on Social Security including the Trustee’s own report…here is some of what the Trustees had to say in their most recent Trustees Report Summary

          Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow. The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

          A temporary reduction in the Social Security payroll tax rate reduced payroll tax revenues by $103 billion in 2011 and by a projected $112 billion in 2012. The legislation establishing the payroll tax reduction also provided for transfers of revenues from the general fund to the trust funds in order to “replicate to the extent possible” payments that would have occurred if the payroll tax reduction had not been enacted. Those general fund reimbursements comprise about 15 percent of the program’s non-interest income in 2011 and 2012.

          Under current projections, the annual cost of Social Security benefits expressed as a share of workers’ taxable earnings will grow rapidly from 11.3 percent in 2007, the last pre-recession year, to roughly 17.4 percent in 2035, and will then decline slightly before slowly increasing after 2050. Costs display a slightly different pattern when expressed as a share of GDP. Program costs equaled 4.2 percent of GDP in 2007, and the Trustees project these costs will increase gradually to 6.4 percent of GDP in 2035 before declining to about 6.1 percent of GDP by 2050 and then remaining at about that level.

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