As our unemployment rate hangs above 9% nationwide the loud cry for more jobs becomes more and more urgent, even angry—and legitimately so. The angry impatience of the unemployed and underemployed demands a practical response from government and industry; human compassion drives the rest of us to work for drastic improvement in the employment picture.
As Tom Braithwaite wrote in The Daily Progress, there is great need to reduce costs of doing business in the United States. He pointed out that companies are currently overburdened with both regulations and taxes; these expenses are naturally embedded in the prices that companies have to charge for their products. Since corporations are taxed more heavily in the U.S. than in any other country but one, and since complex tax regulations burden our productive corporations so heavily, international companies are highly motivated to leave profits offshore where they are not taxed up to 35%.
Since international companies can produce more cheaply offshore while selling to the world’s largest market (U.S.), we go begging for jobs as we contribute to the serious export-import imbalance. Up to $13 trillion of overseas business remains overseas while great companies like Microsoft, G.E., Cisco, etc. hire foreign workers and leave their huge profits offshore—to a great extent to avoid paying U.S. income taxes. As Mr. Braithwaite brings out, with reasonable regulations and no corporate income taxes we would likely enjoy full employment here on our shores. FairTax (H.R. 25 & S. 13) would accomplish this.
The former Head of the U.S. Ways and Means Committee, Bill Archer, asked Princeton University Econometrics to survey 500 European and Asian companies for the effects that FairTax would have on their business decisions regarding locating in U.S. An impressive 400 companies indicated that they would locate their next plant in the United States if The FairTax were enacted; the other 100 companies said they would even go further and move their headquarters here[1]. Surely this indicates that if FairTax were enacted full employment would quickly follow in the U.S.
Certified Financial Planner, Ken Clark, in The Pocket Idiot’s Guide to The FairTax, p. 103, writes: “The FairTax’s most legitimate chance to contribute to economic growth comes from its ability to change the balance of U.S. foreign trade… U.S. goods will finally be able to compete on equal footing with foreign goods, something the current tax code impedes.” This same Certified Financial Planner goes on to point out that under FairTax “… imported goods will lose any tax-based price advantage they had, increasing the demand for some domestic alternatives. In turn, this would keep more money in our economy, which can result in a stronger economic bottom line.” (p.105)
Full employment results as MADE IN AMERICA becomes popular once again.
An increasing volume of research makes it ever more clear that the current I.R.S. Code (some 70,000 pages) of complex systems of loopholes and political favoritism cannot be fixed; it needs to be totally replaced. Being income based as it is, it taxes the conscientious while being so gameable that about 50% of Americans do not contribute to carrying the tax burdens. The underground economy of perhaps 1.5 trillion dollars currently goes untaxed. Under the proposed FairTax, all corporate and individual income taxes are replaced by a simple federal sales tax of 23% on all new purchases above the poverty level; the poor are left untaxed altogether.
Below is a very tight summary of some of the highlights of FairTax:
What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income- and payroll-based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.
The FairTax Act (HR.25, S.13) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.
The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
The FairTax:
- Enables workers to keep their entire (Federal) paychecks
- Enables retirees to keep their entire pensions
- Refunds in advance the tax on purchases of basic necessities
- Allows American products to compete fairly
- Brings transparency and accountability to tax policy
- Ensures Social Security and Medicare funding
- Closes all loopholes and brings fairness to taxation
- Abolishes the IRS.
The details of FairTax (H.R. 25 & S. 13) can be found in an increasing abundance of sources beyond the pocket guide mentioned above. For introductory concepts the reader can go to www.FairTax.org and www.fairtaxnation.com. Another rich and concentrated source of information is FairTax: The Truth: Answering the Critics, by Boortz. Many varied sources can be found by simply Googling FairTax. For the more legal minded, the 130 page proposed law is readily available via internet.
References:
[1] HEARING ON THE IMPACT OF INTERNATIONAL TAX REFORM ON U.S. COMPETITIVENESS: http://waysandmeans.house.gov/media/transcript/10197.html
Filed under: FairTax, FairTax Act of 2011, HR-25, Ways & Means | Tagged: FairTax, FairTax act of 2011, HR-25, Tax Reform | 7 Comments »
