New Tax Proposal Would Abolish IRS in Lieu of ‘Fair Tax’ System
REP. JOHN LINDER (R-Ga.) has introduced legislation which would end the income tax and abolish the IRS and replace them with a state-administered sales tax on all goods and services. The bill, titled the Fair Tax Act of 2009 (HR 25), already has 44 cosponsors and has been referred to the House Committee on Ways and Means.
In a nutshell, the legislation calls for an end to income, payroll, estate and gift taxes to be replaced by a sales-tax system called the Fair Tax.
The Fair Tax, originally developed by economists and businessmen, calls for a flat sales tax of approximately 23 percent on all goods and services. Under the plan, food, clothing, housing and transportation would be exempt from taxes. However, in order to keep the wealthy from playing the system, every month, Americans would be reimbursed by the government for the taxes they pay on these. The reimbursement checks, called “prebates,” would be based on the size of one’s family, not on how much money a person makes. So, in other words, a family of four, who are all legal residents of the United States, would get approximately $700 a month whether they earn the minimum wage or make a million dollars a year.
The program’s appeal comes from the fact that it is the most progressive tax system out there—and the fairest in the truest sense of the word. Obviously, people who can afford to purchase mink coats or Ferraris would pay more in taxes than those who buy windbreakers and bicycles.
Americans would also get more money in their pockets as they would receive their total paychecks, and employers would no longer have to shake down their own employees to pay their share of taxes.
You would not be penalized—or taxed—for simply saving your money. Only spending would incur taxes. So self-sufficient Americans, who produce their own food, would only be taxed if they sell something. From a business owner’s perspective, the Fair Tax would reduce the cost of filing taxes, because all he would have to do is take his total revenue and divide it by the percentage for the Fair Tax. He would then simply write a check to the government to pay his share.
No more shelling out thousands of dollars for accountants, lawyers and tax experts, who make a mint every year trying to decipher the 60,000 pages in the tax code.
Linder has been introducing this bill for the past decade, and every year it dies in committee. With high-level tax evaders in the news, the time is ripe for tax reform. Linder’s Fair Tax proposal is a decent plan that, most importantly, calls for the abolition of the IRS, which targets regular Americans for failing to pay their taxes while ignoring the wealthy elites like Tom Daschle and Timothy Geithner.
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(Issue # 8, February 23, 2009)