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Editorial: Evaluating taxation systems for fairness
ContributedMarch 20, 2013 | 1,090 views | 3 comments
By Glen Terrell and Paul Livingston
“Nothing is certain but death and taxes,” but what else should we know about taxation?
To start, let’s look at government, as it holds the power to tax. All government policy helps some and hurts others.
Government does not create wealth; government can help or hinder the environment for wealth creation;
government must first take before it can give.
There is no free ride, either knowingly or unknowingly: Somebody always pays. Government can overtax, as the law of diminishing returns applies.
Here are some axioms about taxation. Use them as guides for evaluating taxation.
•Only private individuals pay taxes. Businesses charge higher prices to recapture from others the money to pay their taxes.
•Consumption/sales taxes are self-limiting on government and its citizens. For government, as tax rates increase, a point will be reached that the law of diminishing returns comes into play. For citizens, a sales tax is like a tax on their affordable standard of living. Consumption taxes do not consider how the funds were obtained, so the underground economy is added to the tax base.
•Direct taxes (income taxes/payroll taxes) are the tools of tyrants. They restrict the opportunities and behavior of citizens and punish the good behavior of wealth creation. Its collection is intrusive, requires a costly compliance system, and needs strong law enforcement. The U.S. Constitution prevented direct taxation.
The 16th Amendment, passed on Feb. 3, 1913, allows the IRS, the direct deductions of income tax and payroll taxes, and the growth of the tax code to more than 73,000 pages.
•Uniformity restricts tax code manipulation. With a uniform tax code all citizens are treated alike, no loopholes, deductions, or exemptions. Taxing power is greatly reduced as a tool for politicians and lobbyists.
•Progressive taxes are an accepted taxing system. Citizens have accepted and are comfortable with paying more taxes and at a higher tax rate as the ability to pay also increases.
Tax increases raise prices, which suppresses demand and consumption. Tax decreases and subsidies lead to lower prices and encourage demand and consumption.
Let’s use these tax axioms to evaluate the FairTax, a progressive sales/consumer tax system on all new goods and services. The FairTax bill is HR25 and S122.
•Only private individuals will pay the FairTax. (Why tax businesses since, as we know, the consumer ultimately ends up paying the taxes anyway.)
Let’s put to better use the $450 billion spent last year to comply with the tax code.
•The FairTax is self-limiting as it is a tax on the standard of living that one can afford.
•The FairTax system includes adding the prebate to a national sales tax, thus a progressive tax system is created. The prebate shows compassion and support for the poor and economically challenged.
•With the FairTax, as one spends more on new goods and services they pay more tax and at a higher tax rate.
•The FairTax is an indirect tax. The bill calls for the repeal of the 16th Amendment, so that the FairTax and the present tax system are not collected at the same time.
•The FairTax is one tax, and one tax rate. It is in the open for all to see and understand. When you buy, you get a receipt showing the FairTax you paid.
•The FairTax with the monthly rebate changes the sales tax into a progressive system.
•The FairTax by design is revenue neutral to collect the same total tax revenues.
Editor’s Note: For a copy of the 133-page, double-spaced bill, go here: http://1.usa.gov/XDXRoU and click on GPO site. To join the FairTax movement, go to www.fairtax.org and sign up.
Your Opinions and Comments
March 22, 2013 6:49am
The Marcelina Muse
Dry Tank, TX
March 21, 2013 4:27pm
GRAND PRAIRIE TX
March 20, 2013 10:57am
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