Editor’s note: This is the sixth in a series of commentaries in support of The Fair Tax.
By DAVID LEAKE
The stock market has recovered. Home and car sales are increasing. Yet, America’s unemployment remains too high. Millions can’t find work. Millions of others are in part-time jobs or in jobs for which they are over qualified. Millions more have simply given up looking.
A major cause is the American income tax system. It discourages productivity. It drives jobs overseas. At an estimated 73,000 pages of tax laws, rules and court decisions, it frustrates everyone.
Taxing income discourages savings. Taxing businesses (the U.S. currently has the highest business taxes in the world, up to 35 percent) discourages existing businesses from expanding here. Is it any wonder they are moving operations and jobs to countries that tax them less?
Did you know, when the Titanic sank, there was no tax on income? We had an income tax briefly, from 1862 to 1872, to pay off Civil War debts. The Supreme Court in 1895 declared a new income tax passed by Congress unconstitutional. Aside from that, we survived from 1620 until 1913 without a tax on personal or business income.
What this country needs is not more patches on a broken tax system. It needs to replace that system with one that does not punish working people; one that lets them keep more of their hard-earned income. It needs a system that creates jobs by encouraging existing businesses to grow, and new businesses to be created in this country.
Such a tax system has been proposed. It is backed by over $22 million in research. It is a progressive tax that has been heralded in large part by conservatives. It sets a tax rate of 0 percent on families living at or below the poverty line. It taxes middle income families in a range from 1 percent to 16 percent. Only the very wealthy would approach the highest rate, at 23 percent.
This new tax would work like no other. It refunds everyone – in advance – for a portion of taxes they will pay each coming month. The only form of tax anyone will pay is at the cash register. This is a tax on consumption, not on income. It taxes what we spend, not what we earn. It calls for repeal of the 16th amendment to the Constitution, thereby tearing the income tax out by its roots.
Experts say this tax would have raised more revenue, these last three years, than the income tax. The current tax system – with its complex laws and codes – would be gone. The IRS would have disappeared, too.
Jobs would be plentiful. The reason? With no tax burden, new businesses would form. Existing ones would expand. Uncertainties about changing tax rules from Washington would have ended. Still, federal revenues would be soaring.
Here’s a dirty little secret. Under the current system, businesses are just indirect tax collectors for the federal government. Ask any business accountant. Prices of all goods and services are determined by adding up the costs of labor, raw materials, and all taxes. Companies that fail to recover tax costs soon go broke.
Why, then, tax companies in the first place? Let’s just release the “middle man” to do what he or she does best – build their businesses and create jobs.
To sum up, there is a tax proposal in Washington that will reignite our economy and bring back jobs. Its popular name is the Fair Tax.
As House of Representatives Bill 25 (H.R. 25), the Fair Tax currently has 62 members supporting it. Under S.122 it has the support of just six U.S. Senators. Your help is needed to increase those numbers.
Educate yourself by going to www.FairTax.org. Then, contact your congressperson and senators. Tell them they need to support this legislation NOW if they want your vote in the next election cycle.
David Leake is a Fair Tax volunteer in Bradenton, Fla.