While reading the comments to
ShortBus's diary
"Corporate taxes as % of fed revenue: 1950: 27.5%, 2003: 7.4%
" and some posts on Democratic Underground, I noticed quite a few people talking about the
FairTax. While it has some supporters in the progressive blogosphere, they are outnumbered by its opponents who, rightly or wrongly, feel that it is too regressive.
In this diary, I am going to attempt to do some FairTax mythbusting to clear up some of the misconceptions folks have about the FairTax.
More below the fold...
Let me begin by saying that I am neither a supporter nor an opponent of the FairTax. While several aspects of it are very appealing to me, I must confess that I do not know nearly enough about it to take a position yet.
Let's get started, mmkay?
Q:What the hell is the FairTax?
A:HR 25, the FairTax Act of 2005 is a tax reform bill introduced by Rep. John Linder of Georgia. It would eliminate all federal income, payroll, gift, estate, corporate, and capital gains taxes and replace them with a single, 23% inclusive federal sales tax on services and new goods.
Q: Sales Tax!! Are sales taxes not regressive? Surely the poor spend a much larger portion of their income than the wealthy.
A: Yes, normal sales taxes are very regressive. The FairTax, however, is not an ordinary sales tax. Every month, each family will recieve a prebate equal to the tax rate times spending up to the poverty level. This completely UNTAXES families earning income at or below the poverty level. The more you spend, the greater your effective tax rate increases. A family spending twice the poverty level will have an effective tax rate of 11.5%. The FairTax is a progressive sales tax.
Q: If that is the case, why is it supported by Republican asshats like Dennis Hastert?
A: When the bill was introduced, it had Republican and Democratic cosponsors. It also has the support of Democratic presidential candidate and former Alaska Sen. Mike Gravel, hardly a closet Republican. Unfortunatly, Nancy Pelsosi has told Democrats in Congress that they are not allow to cosponsor HR 25 any longer. That is why it is completely partisan.
Q: Will the FairTax "starve the beast", depriving the federal government of money?
A: Hardly! The tax rate would be set to be revenue neutral. In fact the growth caused by it would likely allow for paying back the debt or a decrease in the rate.
Q: As a progressive, why should I consider the FairTax?
A: Here are just a few reasons.
1. It makes the tax system much simpler. This means that there will be no more deductions or loopholes for the wealthy to take advantage of.
2. It will put lots of lobbyists out of business. Most lobbying is done for special interest provisions in the tax code.
3. Money that is spent on the IRS will be saved. It can be put to better use in the economy.
4. Only new goods and services are taxed. This encourages recycling and effecient use (good for the environment). It also allows you to avoid the tax by buying used goods.
5. It gets rid of the regressive payroll taxes for SS and Medicare. It also fully funds them. There will be no more need for "reform".
6. The tax WILL on all goods sold in the US, imported or domsetic. It will not, however, be placed on goods exported. This will make the United States a very good place to do business. It will help stop outsourcing when companies want to hire Americans.
I apologize for the cheesy presentation but I hope it gets the point across.I recommend visiting the following sites.
http://www.fairtax.org
http://en.wikipedia.org/...
As I said before, I'm not sure if I support the FairTax in its current form. I believe it coudl quite possibly be made more progressive while keeping many of the benefits of the original bill. This is a good article with some suggestions.